What is Involved in Small Business Bookkeeping?

someone at computer using bookkeeping software

At a minimum, you need to know what you owe your vendors and what your customers owe you.

You need to create files or online folders for each of these “buckets.”

Your Accounts Payable folder will include bills, receipts, bank statements, credit card statements, and proof of payments (credit card logs, bank transfers, cash receipts).

Your Accounts Receivable folder will include invoices and proof of payment.

Setting up Your System

There are many systems for keeping track of transactions. A simple one is Excel. There are also accounting software programs that automate many functions.

Whatever program you use, you will need to set up at least two sheets: one for Accounts Payable and one for Accounts receivable.

Accounts Payable will need columns for:

  1. Date the invoice came in
  2. Your supplier’s name
  3. Their account number
  4. The type of expense
  5. Amount you owe
  6. Date you paid

Accounts Receivable will need columns for:

  1. The customer’s name
  2. Date you invoiced
  3. Your invoice number
  4. Amount they owe
  5. Due date
  6. Past due amount
  7. Date payment received

Capturing the Information

You need to fill in the information on each sheet daily or weekly. The important thing is to be consistent. If you find it is difficult to keep up with your record-keeping, you may want to look into using one of the professional bookkeeping and accounting services for small businesses in Cincinnati such as BookWerksTM.

Regularly Reviewing Your Accounts

Checking your Accounts Payable sheet weekly, you will stay on top of which suppliers you owe. To stay in good standing with vendors, pay them a day or two before their due date.

Reviewing your Accounts Receivable will show you which customers have not paid you yet. Send them a friendly email informing them your invoice is overdue.

Reconciling Bank Statements

At least monthly, check your bank statement against your own records. This is critical to ensure no fraud has occurred in your accounts. You will also be able to double-check your bank’s math.

Using an Outside Bookkeeping Service

A professional bookkeeping service can automate many of the tasks required to get started—set up your chart of accounts, set up links with your bank accounts, and provide any instruction you need in your accounting software.

They will make sure your records are kept accurately and in a way that preparing for tax time is easy.