Bookkeeping for your Small Business – Part 2: Records needed for Bookkeeping

Published on August 1, 2013 by

What records and documents do you need for Bookkeeping?

Keeping accurate and current bookkeeping is important for the growth of your business.  You can find more information about that in our previous post found here.  When keeping records, you need to make sure that you are organized and have a specific area dedicated to your business documents.  If you are using a filing cabinet, you should have separate files for each of your different documents.

Here is a list of the document/record types that you should use to keep accurate records for your business:

    • Accounts Receivable (Sales/Customer invoices)
    • Accounts Payable (invoices received)
    • List of Inventory
    • Payroll records
    • Petty Cash transactions
    • Bank statements
    • Credit Card statements
    • Profit & Loss statement

 

Accounts Receivable (Sales/Customer invoices) – when you provide service or goods, keep record of that transaction and if the client has paid you. 

Accounts Payable (invoices received) – invoices you received from businesses whose services you have used.

List of Inventory – keep track of your goods or products.  You will need these records to make sure your goods/products are accounted for and will also let you know which products need to be reordered.

Payroll Records – keep an accurate account of hours worked for any employees that receive a paycheck from you.  You will need this information to file quarterly payroll taxes, issue W-2’s to employees at the end of the year, and also to prepare your business taxes for the year.

Petty Cash Transactions – You want to keep track of where your money is going.  If you use cash to pay for business expenses, you need to keep an accurate record.  You will need an accurate amount of business expenses for your tax preparation, and that will include the cash expenditures.

Bank Statements – You should have a bank account for your business that is separate from your personal transactions.  You need your bank statements to properly reconcile your bookkeeping each month.

Credit Card Statements – You can set up a bookkeeping file for credit card purchases that are business related.  It helps to have a separate account for your business purchases.  If you do use your personal card for business purchases, make sure to keep track of which are personal and which purchases are business related.  Also, if you make personal purchases with a credit card, remember to classify them as owner distributions.

Profit and Loss Statement – This is a report that you or your CPA can generate with your bookkeeping software. The Profit and Loss Statement shows what net profit or loss your business has made within a specified accounting period after deducting all expenses from income.

Bookkeeping For Your Small Business – Part 1

Published on May 15, 2013 by

Today is the first post in a series about bookkeeping for your small business.  This post will describe a few different reasons why bookkeeping is important for your business.  Additional posts will follow in the series having to do with what kind of records to keep and tips for you to be more successful in your bookkeeping.   I hope that you find this information beneficial to you and your business.

 

One of the first questions you may have is “Do I have a small business?”  The definition of a “small business” is vague and most people have their own ideas on what it includes.  For this article, we are going to include many businesses types and sizes.  For example: restaurants, photographers, hairdressers, convenience stores, auto sales & repair, small shops (such as a bakery, delicatessen, bookstore, etc.), rental property, construction company, multi-level marketing, a business run from your home, small-scale manufacturing, online businesses (such as web design, programming, online sales, consultation, Ebay or Etsy type selling, etc.), and many more.

 

Bookkeeping is keeping and maintaining financial records.  When running a small business, it is important to keep up with your bookkeeping for multiple reasons.

  1. Knowing what money is coming in and where it is going helps you figure out where you could work on trimming expenses to make your business more profitable or what areas you need to invest in your business to increase profitability.
  2. Keeping an updated record of finances for your business will show you if your business is growing, depreciating, or staying in the same place.  You will then be able to assess where you stand and make a detailed plan for the growth of your business.
  3. You will be able to make management decisions better based on your financial information.  You will be able to see if you are in need of extra employees and can afford to hire someone.  You will also be able to see if you have employee expenses that are not needed.
  4. If you will be applying for a loan, financial statements will be easily prepared and make the loan process smoother.
  5. When it comes time to have your taxes prepared you have organized yearly information to give to your CPA which makes it easier and faster.