Small Business Bookkeeping: What You Need to Know

In the rush and excitement of starting a new venture, it’s easy to overlook the importance of good small business bookkeeping in the early days and let things slide.

When this happens, small business owners often get a rude awakening in the not-so-early days of the business. This can come in a variety of ways, including:

• You get a costly surprise at tax time,
• Inventory has been “disappearing” without your knowledge,
• Employees are miscategorizing transactions, or
• Your high-priced accountant sends you a hefty bill for the time required to “clean up” your books.

When problems occur, it’s not that you set out to do things wrong; it usually just “happens” because of the way your business has grown. Often personal and business banking gets comingled. This can be difficult to sort out. A friend of mine is currently staring at a screen on his accounting app that is asking him to categorize more than 900 transactions because he uses his personal bank account for business.

By the way, a business-only credit card can solve this problem. That’s one of the benefits of a business credit card that I outlined in this article I wrote for the MasterCard Biz website.

There are many good online accounting software services you can use, but the question is which “you” are we talking about here: you personally or you your business? In other words, will you be setting up categories and keying in all the entries, or will you have a bookkeeper do it for you?

Consider these basic areas that fall into the realm of small business bookkeeping:

• Cash,
• Inventory,
• Accounts receivable and payable, and

How many of those does your business have? The more that describe your operation, the greater your need for a professional small business bookkeeping service. If you’re a one-person business that provides a service (no inventory), then you might be able to get by quite easily with something like Quickbooks’s self-employed accounting app. It can be all that a freelancer or independent contractor needs.

But if your business is much more complicated than that, it raises the “degree of difficulty” fairly quickly. Quickbooks, FreshBooks, Sage, Xero, and Wave are some of the more popular apps. Wave is free for its standard accounting package. There are many others in the arena and for a full list, along with ratings, scroll through the listings at GetApp.

As with everything, small business bookkeeping is a facet of your organization that you want to set up properly in the beginning. But, if you missed that opportunity, consider bringing a bookkeeper on board ASAP and have that professional fix the problems you’ve created for yourself and get your bookkeeping running smoothly.

It will cost you a little more in the beginning, but in the long run the investment will be worth it. Your hassles, worries, and potential liability will be greatly reduced.