It can be overwhelming to take care of back-office responsibilities like bookkeeping while still focusing on growing your business. Online bookkeeping services for small businesses can help.
Bookkeeping services for small businesses should do more than help you track financial records accurately. A professional bookkeeper can keep track of all transactions, reconcile bank statements, prepare financial reports, and more. By depending on professionals with greater bookkeeping and accounting knowledge, you reap the benefits of their expertise.
This post will reveal the key benefits of bookkeeping services for small businesses. But before then, let us look at what bookkeeping entails.
Table of contents
- What Is Bookkeeping?
- 7 Benefits of Bookkeeping Services for Small Business
- What Bookkeeping Method Should You Use?
- How to Do Bookkeeping for Small Businesses
- What to Look For in a Bookkeeping Service
What Is Bookkeeping?
In the business world, bookkeeping is the process of recording and organising financial transactions. It is an integral part of accounting, focusing on recording daily business transactions in the books of accounts. These include sales, purchases, taxes, loans, investments, payroll, operational expenses, etc.
Bookkeeping establishes the accounting groundwork. In other words, accounting focuses on analysing the data collected from bookkeeping. This process allows business owners to know their financial position, detect financial problems early and fix them before they grow into full-fledged disasters. How you do your bookmaking determines the accuracy of the overall accounting process. Thus, it is vital to hire a qualified bookmaker to do the job.
7 Benefits of Bookkeeping Services for Small Business
The benefits of outsourcing bookkeeping services for your small business are unmatched. Besides helping you organise and analyse financial information, you can accurately conclude the financial health of your business. These are not the only reasons bookkeeping is essential for a small business.
The Australian Taxation Office (ATO) expects all businesses to maintain specific records and utilise accounting practices to track income and expenditure. Without accurate bookkeeping, tracking and reporting appropriate information to the ATO can be difficult. Here is a detailed overview of how bookkeeping services help small businesses.
1. Makes You Prepared for Tax Time
Every business has to lodge a tax return at the end of the tax year. Tax deadlines are very strict, and lodging can be time-consuming. With a bookkeeping process in place, your financial information will be ready on time. That way, you won’t need to scramble for receipts and invoices with the taxman breathing down your neck.
2. Enhances Accurate Budgeting
Outsourcing a bookkeeping service makes it easier to budget for the business accurately. With proper organisation of your income and expenses, it’s straightforward to review your costs and financial resources. A budget defines the financial roadmap for your business, helping you plan for the future by creating a manageable budget.
Comparing your budget and the actual financial data is a perfect way to detect cost reduction opportunities or potential cash flow issues. If your financial books are inaccurate, it’s hard to make accurate budgeting since it will all be guesswork.
3. Promotes Better Decision Making
As a business person, you need to clearly understand your finances to plan your company’s future effectively. You may have to make significant decisions like opening a new location or hiring a new employee. To make such decisions with confidence, it’s critical to understand your company’s financial performance.
Accurate bookkeeping with the help of a professional offers up-to-date information, helping you make informed decisions. If the reports say that your business is running out of capital, you can opt to take a loan to boost development.
4. Maintains Organised Records
The stress of trying to find a crucial document at the last minute can lead to missed deadlines and possibly a few errors. One thing a business can’t afford to do is make mistakes, as it could lead to costly consequences. A bookkeeping service can help with that! It will keep your books updated throughout, and help you maintain organised records. That way, it will be easier to find any information you need in no time.
5. It Helps You Focus on Other Business Operations
If you decide to do bookkeeping on your own, you will spend much of your time paying invoices, processing payroll, and tracking expenses. As a result, you will have insufficient time to attend to other operations. A bookkeeping service allows you to focus on what you do best. Having enough time to focus on operations enables you to grow your business effectively and gives you ample time for research and development plans.
6. Lowers Costs
Every business owner aims to reduce their overall costs of operations. One way of achieving this is minimising the salaries and wages of workers by employing only a few. An in-house bookkeeper requires a significant salary and benefits, but it’s possible to do without them. The cost of hiring a third-party bookkeeping service can be relatively lower, and you will have an assurance of excellent services.
7. Avoids Conflicts of Interest
It can be risky to entrust bookkeeping and accounting to one of the owners in partnership businesses. Misconduct accusations can potentially ruin the relationship even when a record-keeping error is unintentional. If something goes wrong, the other members might question the intentions of the person responsible.
Hiring an independent bookkeeping service helps avoid these inconveniences while boosting confidence among the owners. They can have faith that every financial statement is true, accurate, and unbiased.
What Bookkeeping Method Should You Use?
One of the first steps to bookkeeping for small businesses is to decide which method you should use. The method you choose may depend on various factors, including the amount of revenue you earn and the volume of daily transactions your business processes.
Below, we discuss two of the most popular bookkeeping solutions for small businesses—single-entry and double-entry bookkeeping.
A single-entry system tracks all income and expense transactions. That means each transaction is recorded once and posted to the appropriate account.
For example, if you receive $1,000 from a client, you would enter this into the “Sales” account. This method is ideal for businesses with low volumes of sales or purchases. However, it does not support a detailed analysis of past transactions.
As the name suggests a double-entry bookkeeping system tracks all transactions twice. In addition to recording the original entry, it posts the same transaction to both accounts.
For example, if a customer pays you $1,000, you would first record (debit) the transaction in the Sales account. Then, you would also post the payment to the Customer account (credit). This method supports a more detailed analysis of past transactions because you can access information about previous entries. It also provides better visibility into cash flow.
How to Do Bookkeeping for Small Businesses
Bookkeeping tasks may include: entering transactions, reconciling accounts, analysing financial data, and creating monthly financial reports. Hiring a professional bookkeeper with extensive experience in the field can save you time and improve your business decision-making.
Bookkeeping for a small business requires these three steps:
Track Each Transaction
The first step in any bookkeeping process is tracking each transaction. The bookkeeper needs to know what type of transaction it is – whether it’s a purchase, sale, receipt, or withdrawal. They must also determine which account to put it in. After entering the transaction, the bookkeeper must ensure that it is correct. This includes verifying the date, amount, and source of funds.
Accounting software like Xero and MYOB can help speed the process along.
With tools like Xero, bookkeepers create invoices, bills, receipts, and other documents. An experienced bookkeeper has the knowledge to help your business use these tools accurately and effectively.
Manage Bank Reconciliations
Tracking every transaction goes hand in hand with bank reconciliation.
Bank reconciliation is the process of matching or comparing the balances in your accounting records against the actual balance in the bank. If there are discrepancies, the bookkeeper must find out why. Some common causes include incorrect debits or credits, missing transactions, or duplicate entries.
The bank reconciliation process is pretty straightforward. First, it involves obtaining the bank’s ending cash balance and adding any deposits in transit from your business. Afterward, the bookkeeper subtracts any funds not yet cleared by the bank and adds or deducts any other items.
The second part of the reconciliation process involves obtaining your business’s closing cash balance, subtracting any bank fees, penalties, or NSF (non-sufficient fund) checks, and then adding any interest earned. In the end, your company’s adjusted cash balance should match the bank’s closing balance.
Prepare Financial Statements and Reports
Financial statements provide information about your company’s performance over a specific period. Reports help you analyse your finances and make informed decisions based on the data.
At best, your business should prepare financial statements at the end of each month or quarter. This may include an:
- Income statement
- Balance sheet
- Profit and Loss
- Cash flow analysis
Visory’s bookkeeping services extend beyond tracking transactions, bank reconciliation, and financial reporting.
We also offer accounts receivable, payable, payroll, and other support that growing businesses often need. Whether you’re looking for a simple bookkeeping service or one that covers everything, we have what you need.
What to Look For in a Bookkeeping Service
An online bookkeeper is typically an individual with relevant experience in accounting services offered to a diverse range of businesses. When looking for a bookkeeper, choose one that is well-acquainted with your business type and preferably industry. Look for those that specialise in helping small businesses like yours.
Their service should portray excellent skills and experience to determine profits, losses, turnover, and other financial factors. This will help you determine the financial health of your business with ease.
Bookkeeping Services for Small Businesses
Visory is a reputable bookkeeping company that gives you access to accounting and finance services that scale with your business. Our team of experts has experience in different industries and is ready to hit the ground running anytime. You will receive strategic reporting and insight to drive growth. Our monthly subscription fee is affordable and worth the investment. Contact us now to book a meeting.