Small business owners have great ideas and innovative ways to attract customers to their product or service. While they excel at marketing and selling their product and promoting the business, most of them do not understand the first thing about bookkeeping. It’s important that the owner understands the intricacies and basic information about bookkeeping for their business, even if someone else manages the books, in case a financial emergency ever arises. Here is some very basic information you can use for your small business.
Cash accounts
If your business uses cash for any transactions (and most businesses do to some degree), then, obviously, it’s vital that you carefully keep track of it. Because your books will be the only easily accessible record of cash transactions, you’ll need to stay on top of keeping these accounts organized. If cash isn’t monitored, the business could end up losing a lot of money and you might not notice until it is too late.
Inventory
When you have product waiting to be sold, it’s worth the money you paid for it and what its sale value will be. It’s important to keep an up-to-date account of the inventory you have and consistently update your records so you know what needs to be restocked and what’s selling and what isn’t. It’s also necessary to do a frequent tangible check of the inventory, to make sure the numbers match what’s actually being stored.
Accounts receivable and payable
These are pretty straightforward: accounts receivable are what clients and customers owe you if you use a payment plan, while accounts payable are what you owe to other people. These are important categories to keep track of, so you know how much money is supposed to come in and out of the business and you can make sure you send and pay bills on time. Nothing is worse than an angry customer who hasn’t been paid
Payroll expenses
Keeping track of how much payroll and employee benefits cost will help you manage your expenses much better. A large percentage of a company’s profit often goes to payroll, so it’s vital you know how much money is leaving the company. By monitoring payroll, you’ll know whether or not you can afford to hire new employees, and grow your business.
Frequently evaluate
Finally, if you’re serious about keeping up with bookkeeping, you should frequently evaluate the books. At the end of every quarter, make sure everything is in order and there are no missing pieces of information. Once you have your accounts in order, you’ll feel more at ease and ready to enhance your business.
While this may all seem a bit daunting or even intimidating, there are dozens of applications available to help you manage your business accounts. For an in-depth look at some of the best applications available, click here!