Most small business owners hate the idea of having to keep books. But as a business owner, that’s one of your primary jobs.
Good bookkeeping will make tax time easier as well as provide you with valuable information about your company.
There are three parts to bookkeeping: setting up the books, data entry and filing that goes with it, and the analysis of what those numbers mean.
As a business owner, you can either perform those functions yourself, or you can hire an accountant to do them for you. There are advantages and disadvantages to both approaches.
Going At It Yourself
Learning to keep your books is like learning to read and use a word processor at the same time.
In bookkeeping, you have to learn a bookkeeping system and a software system at the same time, which can be very frustrating. However, the savings from hiring an accountant may return a smile to your face. In addition, you will have hands-on control over your company’s money.
Setting Up Your Books
Setting up your books requires you to select an accounting software.
Check out reviews and do some research to find one that best fits your business’s needs.
A good software will provide you a means for charting your accounts, expenses, income, liabilities, accounts receivable, accounts payable, equity, and more. This information will paint a picture that will reflect the health of your business.
Data entry is a very important step and the information recorded must be accurate. Again, you can perform this task yourself or you can delegate it to someone else.
Data entry includes day-to-day filings, processing receipts, and entering financial data into your accounting software. Many businesses, both large and small, allow store managers to perform at least some data entry functions.
In any case, you must establish strict procedures for filing, entering data, and categorizing transactions.
Analyzing the Information
This is probably the most difficult step of the accounting process. This is where you look at all the information and all the numbers to determine what they are telling you.
Did sales go up? Did expenses go down? Why did sales go up and why did expenses go down? What is happening with your business?
As a business owner, this is where the numbers either validate or strike down every decision you’ve made. If you don’t have an accounting background, you may want to hire an accountant to review your data.
Hiring an Accountant
If you’re a small business, you can perform most of the accounting functions yourself. This will save you a significant amount of money. You can always consult with an accountant if necessary.
On the other hand, if you want nothing to do with it, you could hire a full-time accountant or bookkeeper. His or her responsibilities would be to set up an accounting system, enter all data, and then analyze and report back to you what that data means. Obviously, this person should be someone you trust and have vetted.