Bookkeeping 101- Simple Bookkeeping for Your Business

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Record keeping is an integral part of any business. Simple bookkeeping is all you need to learn in order to take care of all of your records. Some options for keeping records include manual bookkeeping, using a freelance bookkeeper, allowing your accountant to do it or purchasing a special computer package Record keeping is an integral part of any business. Simple bookkeeping is all you need to learn in order to take care of all of your records. Some options for keeping records include manual bookkeeping, using a freelance bookkeeper, allowing your accountant to do it or purchasing a special computer package

If you are a small business owner, it is essential that you keep track of all of the money flowing in and out of your business at all times. You need to devise a bookkeeping system that will allow you to keep proper records. Having proper records is a load off your mind when tax time comes around. It is also a way to accurately chart your progress.

Nobody enjoys keeping the books, but it is not as difficult as you may anticipate it to be. You don’t have to be trained as an accountant to learn how to do simple bookkeeping. All it requires is planning on your part, organization and setting aside time to update the books on a regular basis. If you are disciplined, you should find that bookkeeping will become easier over time.

Why is Record Keeping Necessary?

You need to keep excellent records in order to grow your business and also to make sure you do not have the IRS banging on your door. What else? Let’s take a closer look:

• You need to chart your progress. To evaluate the past, present and future financial health and well being of your business, you have to have records to show the reality. Are you making money or losing it?

• You have a method of analyzing what you are doing with your funds for your business, and from there, you can figure out ways to operate your business in a more solid and cost friendly manner.

• You can take a clear look at who your customers are and which products and/or services they seek. This knowledge can help you target your demographic better.

• Budgeting helps keep you on track, as you have a frame of reference on a monthly basis to compare with.

• Good record keeping allows you to identify problem areas, such as cash flow problems and to correct the situation as soon as you can.

• Bookkeeping is a concrete way of showing investors, the IRS and your investors how your business is doing. Just as in a court of law, you need to show solid proof of your progress.

Source: Lloyds TSB “Business Guide” (http://www.lloydstsbusiness.com)

Options for Keeping Records

There is more than one way to keep proper records. Choose the method that is best for you.

Manual Bookkeeping

You should be able to buy a bookkeeping system at a stationery store. You can then manually enter the amounts of money that are going in and out of your business and analyze these under a variety of headings. The downside, however, is that you will need to add up columns of figures and this can be a time consuming task. In addition, paper books are not the best source for management reports or close analysis of the state of the condition of your business.

Spreadsheet Bookkeeping

Many people like this option because it is relatively easy to set up on the computer. The disadvantage to a spreadsheet, however, is that just like the manual method, analysis and management reports are not simple to do, plus cross-checking is impossible. If you run a small business that has only a few non-cash transactions, then this method would be fine for you.

Freelance Bookkeeper

If you cannot be bothered to learn how to keep your own books or simply find it tedious and time consuming, hire a person qualified to do so. The only problem with this option is you have to find the money to pay them to keep your books.

Accountant

Accountants are more than qualified to keep your books, but this can be a very costly solution. In turn, if you are a person who likes to be able to check your own financial progress on a more or less consistent basis, then you may find that your accountant is not always available when you need him. Some small business owners only get to see their books every six months or even once a year. This means that you may be working in ignorance of your company’s financial condition for the majority of a calendar year.

Personal Finance Package

You can buy these types of packages to download on your computer. Some have a function to handle VAT, while others may not have what you need at all. Unfortunately, the opportunity for analysis is not really available in this case.

Dedicated Computer Accounting Package

These packages are varied in their effectiveness and price. You can find small, inexpensive packages right up to packages that are pricey and include everything. It is important to note that to use these packages you must have at least a working knowledge of accounting principles. They are a good option, however, for keeping on top of what is happening in your business.


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