There are certain aspects of a business that owners love having creative freedom on and managing duties for, and others that simply aren’t as glamorous. For a lot of people, the latter includes things like bookkeeping for a small business, doing a competitor analysis or maybe staying on top of HR compliances and industry regulations.
Such tasks are usually entrusted to the executive team and other management personnel. Owners may check in with their staff from time to time, but they won’t always sit down and take on the nitty-gritty details themselves.
If you do want to have a better handle on the books or other aspects of your business—or if you want to take advantage of bookkeeping services in the future—you need to learn a thing or two about the process first. When it comes to business bookkeeping, here are all the major points you need to know.
Everything That Goes into Business Bookkeeping
So what does it mean to “balance the books”, anyway? It basically means to make sure you know where every dollar in your accounts is coming from and how you’re using it. This goes beyond accounting.
It starts with tracking invoices and sending payouts on time, but there are additional things to consider. The main aspects of financial management are listed below.
Accounting helps you understand your cash flows. It tells you when you can expect certain amounts of money to come in and others to go out. It also lets you know when it’s time to start thinking about replacing equipment thanks to depreciation expenses and predictions.
If you have no idea how bookkeeping works, this is the best place to start. When you have a deep understanding of accounting, you’re better able to see the spending patterns in your business. Over time, this results in making better financial responsibilities, especially when you consult the advice of your CFO or lead accountant.
There’s tracking monthly expenses and annual revenue, then there’s figuring out how you’re going to pay for taxes. As a business owner, you have national taxes to pay and sometimes, state taxes, too.
You may even have to pay a tax for a special project you took on this year or some sort of industry regulation depending on the type of business you’re in. These expenses can add up quickly, but the good news is you don’t always have to pay them all at once. Instead, you can plan ahead for your taxes and pay them every quarter.
The key word there is planning ahead, though. The last thing you want to happen is to be late on tax payments and end up having to pay even more than you expected.
Payroll should be part of your regular accounting efforts, but it’s worth pointing out as it’s own financial responsibility. Payroll is basically what keeps your business running. Sure, you have materials to purchase and startup costs to pay off, but without your employees, you’re out of luck.
Keep everyone happy and make sure you’re treating them fairly by staying on top of payroll. More so, consider bonus opportunities at the end of the year or see if you have enough financial wiggle room to set up a bonus policy among your team. This will increase company morale and encourage higher levels of productivity, which are results that everyone can enjoy.
Saving and Investing
Think of employee bonuses as an investment. When you give more to your team, they give more to you. They are sure to work harder, produce better results and come up with brighter, more creative ideas.
This all begins with your leadership. Another thing that depends on how you lead and the decisions you make is the overall success of the company. When you start paying closer attention to the books, you can start to get a better idea of the future.
Knowing where you stand financially sets you up to start thinking about expansion opportunities. This may be funding research for your new product line or getting more office space and hiring additional team members. Whatever your next step is, you’re going to need the proper funds to keep your business growing.
Reasons Why Accurate Bookkeeping Matters
The most obvious reason to learn more about your bookkeeping process is to understand where all your money is going. But, there’s more to bookkeeping than making sure everything is balanced.
There are all kinds of benefits available to you once you start paying more attention to this part of your business. These include:
Sometimes, the best way to make more money isn’t to generate additional income but to focus on saving. Saving allows you to best utilize the product margins you already have established. It can be the difference between implementing those end-of-year bonuses mentioned above or having to hold on that initiative for next year.
Saving also allows you to purchase new materials, create more products in each new line or simply to continue increasing your savings for an even bigger initiative later down the line.
It doesn’t really matter what you plan to do with your money if you don’t have enough to spend. Start getting smarter about how you save in order to accomplish all the things you want your business to do.
Saving time is not necessarily the same as saving money, but the two definitely add up to your benefit. When you learn how to balance the books and have a good system in place for managing this task, you can spend more time on other things.
Suddenly, the time you spend on accounting and payroll significantly decreases and you find yourself deep-diving into new things you can learn or other tasks you’ve been meaning to work on.
Your whole schedule starts to open up more and more, and this may be true for your whole accounting team, too. Once everyone is on the same page and up to speed with your improved bookkeeping system, you can all work together to figure out the most profitable next steps.
Speaking of working together, be careful of internal theft. This is more possible than you may think, as unlikely as it may seem. Although it’s never good to realize someone has betrayed your trust and is taking money from the business, it’s always better to realize it sooner rather than later.
As such, learning how to manage the books makes you better prepared to catch theft when it happens. It gives you the knowledge to identify when something is off and the tools you need to move forward and fix the situation.
Not to mention, the books can help you track an incident of theft straight to the source. Going through your records and finding all the cash flows that don’t seem right may be just what you need to find whoever is taking money that isn’t theirs.
Get More Out of Misused Resources
Even if you’re absolutely positive there is no theft going on in your small business, it’s in your best interest to make sure there’s no waste, either. Keep in mind that part of bookkeeping is to increase your ROI as much as possible.
Are you outsourcing certain things that you’re better off managing in-house? Are you spending money on software or support products or even labor costs that can be cut somehow?
Taking a look at your budget can help you identify such opportunities and more. You may find yourself asking why you’re continuing to subscribe to a certain service or pay for another. Or, you may realize certain pieces of equipment are depreciating faster than you expected them to.
These are things worth identifying and fixing as soon as possible. The better you get at catching waste when it happens and being smarter about your spending overall, the more money you will have available to invest in the things that are actually valuable to your business.
Bookkeeping Services for Small Business
Bookkeeping for a small business isn’t exactly common knowledge, but it doesn’t have to be rocket science either. The main thing to realize is that you have to start somewhere. Maybe try to learn how your payroll works first or take a deep-dive into this month’s accounting records.
Or, consider investing in professional support to help you figure everything out. That’s where we come in. Our automated bookkeeping services can help you handle all the ins and outs of financial management, even if you have no prior experience with this!
Not sure if you need to take advantage of bookkeeping services? Take our free QuickBooks Health Check to get an inside look at the state of your books.