You’re busy. Running a business. Managing a staff. Caring for clients. Running errands. Taking care of the family. It all takes time. Now let’s throw maintaining the financial records of your company on top of all of that – daunting. Small business bookkeeping doesn’t have to be hard, but it can be confusing. Here is some basic knowledge that will help you get your bearings.
Bookkeeping vs. Accounting
As the bookkeeper for your small business you simply need to keep track of your money. All the accounting jargon can be summed up into these four questions:
- Where does your money go?
- To whom does it go?
- Where is your money coming from?
- From who is it coming?
That’s it! You’re basically filing each expense and income transaction into a category that answers one of these questions.
Key Terms for Small Business Bookkeeping
Memorize these 6 categories for easy bookkeeping.
Where does your money go? To whom does it go?
- Purchases (supplies you buy for your business). Ex: if you are a restaurant: plates, napkins, aprons for staff, menus, toilet paper for the bathroom, receipt paper for the cash register.
- Payroll Expenses (staff salaries and other costs).
- Ex: payroll, payroll taxes, unemployment taxes, 401k payout.
- Accounts Payable (money you owe to others).
- Similar to purchases, but accounts payable are not paid immediately whereas purchases are. Accounts payable often have a P.O. associated with them. Ex. P.O. for a large order of meat from a butcher shop.
- Retained Earnings (the profits you’ve accumulated).
- Money you keep in your account to keep the business running.
Where is your money coming from? From who is it coming?
- Sales (the revenue you make from selling products/services).
- Ex: If you are a restaurant, one plate of food.
- Accounts Receivable (money due from customers).
- Similar to sales, but accounts receivable are not paid immediately whereas sales are. Accounts receivable often have a P.O. associated with them.
And you’re done!
As you file your receipts, orders, invoices, and POs into these categories, you’re well on your way to becoming a proficient bookkeeper for your small business. There are many online tools you can utilize to make this task easier including Xero, Quickbooks, and Bookkeeper.
For help with the more complicated accounting, check out PayTech. Our friendly staff knows the hard work you’re putting in to keep your business going. We put in the same effort to make sure your small business accounting is taken care of so you can focus on what you do best! Call us or check out our website for pricing and more information.