Small Business Accounting 101: How to Set Up and Manage Your Books

Every business has to manage its finances, but also its books. Thus, bookkeeping is one of the most important things you need to pay attention to and organize efficiently. If you are a small business owner just diving into this, you have come to the right place. Accounting is not so challenging. But you need to have a few basic knowledge to understand how it works and what you need to do. 

At the same time, there are a few steps that can help you organize and put all your books in place. Not having any experience with this can make the entire organization more stressful for many business owners. Thankfully, by following these easy steps you will be able to set up and manage your books. 

What Is Bookkeeping?

If you are not familiar with accounting jargon, you might think that this is all about books (such as novels or romance books). But they do not have any connection to this. Bookkeeping, in the accounting jargon, refers to the process of recording and managing all your finances. Here are the purchases, the sales, the payments, and so on included. 

Keeping record of all these transactions is essential to every business. Starting a new business is something exciting, but it can also be overwhelming if you do not know where to start organizing your documents and books. 

Here are a few steps you need to go through to set up and manage your books. 

Open Your Bank Account 

The first thing you need to do is to open a separate bank account. Many entrepreneurs and business owners who are a novice do not know that they are allowed to open a business bank account. Separating your expenses and transactions is important. Because the accounting will be done easier. Mixing your personal finances with the ones of your business is not recommended. It is important to be optimistic about the future, but also be prepared in case something happens. 

If your business goes bankrupt, because you have a separate bank account, your personal assets will be protected. You can find an online service that assists you in this process, as due to the coronavirus pandemic, many of these actions can now be done fully online. Of course, opening your bank account needs to be done after you have legally founded your business. 

Keeping Record of All Expenses 

When you have a business, there are a lot of expenses that will be deducted from your company’s finances. And to master the skill of bookkeeping, you need to have a good foundation. The thing you need to start with is to organize and track your expenses as efficiently as possible. There are many different types of expenses you might have. For example, if you have business trips, for sure you have traveling expenses (such as plane tickets). 

You may have business meetings you want to hold in an informal setting, maybe in a restaurant or cafe. You may have office-related expenses. So, you need to document all of them and keep the receipts stored efficiently. This will allow you to analyze the performance of your business, but also the monthly expenses. 

Organize Bookkeeping Efficiently 

One of the most important steps you need to go through is to establish and maintain clear bookkeeping. If you have employees, you might want to reimburse some of their costs. For example, if they went on a business trip, collecting the books and organizing them efficiently is essential. 

As your business will slowly grow, you will have more and more employees, thus more payments to take care of. Keeping a record of all your payments and transactions is essential and it ensures your success as a small business owner. You can set specific days for collecting the books, reimbursements, or making payments. 

Accounting Tools 

Well, if you are not familiar with the accounting domain, you will surely learn more about this domain as a small business owner. Accounting can seem complex and challenging, but thanks to the evolution of technology, you can use many accounting tools you can find online. You can find some free versions too, but it will be recommended to purchase the premium version. 

Even though accounting might not take much of your time now as your business is just starting its activity, over time the frequency of payments will increase. At the same time, these accounting tools you can use are not only for managing expenses or tracking payments. 

They can offer you financial reports so that you can analyze your expenses and build other spending strategies if needed. Moreover, these tools help you to automate your bookkeeping tasks, thus helping you save time. 

Payroll System 

Even though you might not have so many employees at the beginning, if your business is successful, their number will surely increase. So, you need to have a good payroll system that makes reimbursements, but also wage pays more efficient and easier. 

At the same time, this system will also help you to pay your taxes easily and you can connect it to your accounting tools. Apart from this, you may work with independent contractors too, that are not employed at your company. And keeping track of all your spendings and how much you paid each collaborator and employee is an essential part of bookkeeping. 

Ending Note 

Setting up a small business is what marks a new beginning for yourself. Beginnings are always challenging, but they help you develop and improve yourself even more. Accounting can seem like something complex and dull, especially if you do not have any financial knowledge. Bookkeeping is the process of recording and managing all your payments and expenses and it is essential for the successful management of your business’ finances. 

So, set up a separate bank account, keep a record of all expenses, organize them efficiently and use the accounting tools you have access to nowadays. A good payroll system and an efficiently organized bookkeeping system will help your business thrive.