How to Do Bookkeeping - So, you have finally decided to venture out on your own. You have started your own business. You got the business license, and you are now for real. Maybe you do people's hair, or maybe you are an interior decorator, but whatever your chosen business is, you need to either know how to keep the books or know someone you can hire to do bookkeeping.
Keeping track of the numbers is a very important part of your business. Too many, they see it as a waste of money. Yes, it is an expense, but it is a necessary one. But what if you are not bad with numbers, and maybe you are running your business part time? Maybe you have a few hours a week to stay on top of this, so how do you do bookkeeping? Without spending a ton of money.
If you don't feel your business is ready for the expense of simple bookkeeping software, then you can do this manually. Don't freak out, there are still businesses that do this manually.
If you are basically a micro mini business that works a few hours a week, as you are just starting out, then the best way to start is to go to the dollar store and invest in a couple of baskets.
Start with Baskets!
Create an office area the best you can in your house or apartment. A place where you can keep all your papers. If you set this up right from the beginning, then you can get in the habit of using this system, and your kids don't end up coloring on your invoices they found in the living room. The office area, whether it is a table in the spare room or a corner of the living room, is where any papers to do with your business should end up.
Now that you have your baskets, you will label them. One for a copy of your invoices and the other for any expenses related to your business. This part is important. This basket is not for the receipts for the curtains in your bedroom or for that day of shopping for yourself. This is for business expenses only. Take them out of your purse or wallet as soon as you come home. Always make sure and get a receipt.
Throw Receipts and Invoices in the Baskets
Business expenses would be things such as supplies to operate your business, tools to operate your business, office supplies (such as your baskets). If you have a van or car for the business put all the receipts in here as well.
Now if you are doing this manually, then you will need two sets of books with columns, you can even make your own if you don't want to spend any money. One is for recording your sales. If you live in an area that you have to collect tax on your sales, then you should separate them out under two columns. One is the basic invoice and the other is the tax collected. You can have another column to check off if the invoice has been paid.
This way, when it comes time to submit the tax collected, you just quickly add up the column.
Now the second book, you can create columns and name the columns by the category of your expenses, such as Business Supplies, Tools, Equipment rentals, Office supplies.. that type of thing.
Now take a look at your receipts, and record them under the right columns. If you do a bit of this each night, then you will instantly know just how your business is doing. If you are allowed to claim the sales tax, then split the receipt up, with the original expense under the right column and the taxes under a column labeled sales tax. This way you only have to add up the tax column to know how much to claim.
This is a very basic form of bookkeeping, but with your handy dandy calculator, you can see pretty quick, whether your income is higher than you expenses. Each month you should add them up and see where you stand. By doing this, you can learn what areas need to be tweaked so that you can make more money. Maybe find cheaper suppliers for example. Bookkeeping is a way to see whether you are making money or not.
If you would like to do this on computer. It is done basically the same way. I personally have found Simply Accounting Software to work well, but there are others on the market as well.Credit: amazon.com
Simple Bookkeeping Software - Once you have picked a simple bookkeeping software, then install it on your computer. Allow some time for this too. Don't be in a rush. Once it is on, there will be a tutorial on just how to use this software on the computer. Take a day to learn this.
You basically will have the same idea as your books. There will be a sales section and a expense section.. The difference is that the computer will be adding these up much quicker than you can, and there are reports you can run, such as "income statements" to see just where you stand with income versus expenses.
Your Business Grows - The bigger your business gets, the bigger the numbers may get, but the bookkeeping is basically the same. Although once you start getting into leasing vehicles or owning buildings then things can get a bit more complicated. At this point consider having a chat with your accountant, so that your knowledge of bookkeeping will grow with your business.
Otherwise, this may be a good time to hire a bookkeeper. If you already got the business started and have the simple bookkeeping software on your computer, then you may want a bookkeeper for small business that comes right to your house or office.
The fact that you understand and are aware of bookkeeping procedures, makes you ahead of the game.
Learning how to take care of the books, even if you don't plan on continuing to do it with your own small business, is one way to really understand the ins and outs of making money with your business. Many people just bury their head in the sand and are mystified when the end of the month comes and they can't draw any money from the business account for themselves.
Learning how to do bookkeeping will keep you on top of daily issues, and a understanding of where your money is going daily.