Do not be daunted, or afraid. Bookkeeping is not scary – it is just keeping track of all of your expenses, as well as your profits, as well as making sure everything is in the right place, and that it is all organized.
Bookkeeping does not have to be scary. Here are the basics of bookkeeping to help you get your foot in the door if you are thinking of tackling your business records.
Always have the Proof
This is something many people forget, but it is so obvious – you always have to make sure that you get receipts for any business related expense. If you do not have the receipt, then the government will not allow the expense! Anything not backed up on paper is automatically a personal expense, and taxable to you. It does not matter if it is small or large, every single expense needs a receipt.
To keep track of your expenses, you need to make sure that they are entered properly in your bookkeeping system. Do not have a system? It really can be anything – you can use a computer program specifically for bookkeeping, like Quicken or Simply Accounting, or if you know what you are doing, just using a simple Excel spreadsheet can work.
If you are just starting out, using software is the best option, as it streamlines the process a lot. Remember that it also depends on the size of your business – if you have $1 million in sales, you are probably too big for a simple spreadsheet. And you do not need $1,000 software if it is just you!
Keep it Balanced
Making sure everything is balanced is vital to your entire business. Your bank balance entries in your bookkeeping system must match your bank account statements. This is how you know if you have somehow missed entering something in – if it does not match, something is not right.
With cash transactions, remember that they should be entered into a separate (Cash) account, just like it would be treated at the bank. Always keep the receipts for your cash transactions as well, because it is just another part of keeping track of everything.
You should always have a separate business and personal account as well. The IRS has rules against mingling accounts, and it makes everything so much easier when it is separate!
Debits and Credits
If you do not know the debits and credits system, it is going to take a lot more room then what I have to explain it all to you. The concept is so confusing, even the pros get confused now and again.
Basically, what I mean with this point is to just understand the concept of costs and revenues. Any cost is something you are paying for, and any revenue is something that is coming into your company. All of this is without taxes, because they should be tracked separately.