bookkeeping small business

If not done at the time of the transaction, the bookkeeper will create and send invoices for funds that need to be collected by the company. The bookkeeper enters relevant data such as date, price, quantity and sales tax (if applicable). When this is done in the accounting software, the invoice is created, and a journal entry is made, debiting the cash or accounts receivable account while crediting the sales account.

Accountant-friendly software

Visit SBA.gov to find out more about how small businesses can stay legally compliant. Using a spreadsheet is the cheapest option, especially if you use Google Sheets rather than Microsoft Excel, which costs a monthly fee. However, general ledgers can get complicated if you’re trying to juggle small business bookkeeping multiple accounts. Every time you perform a financial transaction—for instance, make a sale, accept a client’s invoice, or pay a bill—you should record that transaction in your general ledger. Recording a financial transaction in your general ledger is referred to as making a journal entry.

Accounting equation

bookkeeping small business

That said, good bookkeeping ensures that you have the numbers and data that you need to help your accountant make predictions about your business’ future, and diagnose your business’ financial health. If learning the ropes of small-business bookkeeping sounds intimidating, have no fear. Discover the different options available to you, and why it’s so important to keep detailed financial records. After you have a bookkeeping system in mind, the next step is to pick an accounting software. Spreadsheets, such as Microsoft Excel, can be used for simple bookkeeping.

Step 2: Categorize your business transactions

  • You can use the pricing tool on the Bookkeeper360 website to test out all the pricing combinations for each plan.
  • Zoho Books is surprisingly affordable, and it even has a free version.
  • But most businesses in the hobbyist stage can get by using either a simple spreadsheet (like our free Income Statement Template) or one of the many accounting or bookkeeping software solutions on the market.
  • In other words, doing accounting by hand is possible—but it’s also more complicated, time consuming, and error-prone.
  • You can further analyze your balance sheet and get insight into your business using financial ratios.
  • Yes, switching from other accounting apps or products to Wave is easy!

We strive to learn about your pain points and find practical ways to improve efficiency, streamline accounting processes, and save money. Figuring out what to charge is any small-business owner’s greatest challenge. Too little and you aren’t fairly compensated for your work; too much and you’ll have a tough time competing with other bookkeeping businesses. Start with a business checking account and, as your business grows, you may also opt for a business savings account to let your excess funds earn interest. Both traditional, brick-and-mortar banks and online institutions offer attractive banking options, so shop around before deciding where you want to park your hard-earned money.

Your financial transactions

Offers and availability may vary by location and are subject to change. Additionally, Bookkeeper360 is unique in the way their plans are designed. Each plan is developed based on the frequency in which you need bookkeeping assistance. Access Xero features for 30 days, then decide which plan best suits your business. Invite your advisor to work with you on the online accounts anywhere, anytime.

  • Learn how bookkeeping can streamline business practices with small business bookkeeping tips.
  • Bookkeeping is largely concerned with recordkeeping and data management.
  • With these tips, you can begin to streamline your finances to give your small business the best chance of succeeding.
  • The accrual accounting method records financial transactions when they occur rather than when cash exchanges hands.
  • For the regular price of just $13 a month, Xero lets you send custom invoices, reconcile bank transactions, capture receipts for easier record keeping, and track inventory.

The more often you reconcile, the faster you’ll catch any overlooked transactions. We suggest turning reconciliation into a habit and doing it at least monthly to prevent the work from piling up and becoming overwhelming. For example, a loan would go under liabilities since you’ll have to pay it back later.

Current top accounting software options

bookkeeping small business

Best for Multi-User Small Businesses