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How Do I Set Up Bookkeeping for My Small Business?

If your business were a ship, bookkeeping would be the sails. Knowing how to properly keep track of the money coming in and out of your accounts can better help you navigate your business accordingly and pivot when necessary. Thankfully, you don’t need a degree in accounting to run the books. Even still, you may be wondering, “how do I set up bookkeeping for my small business?” In this article, we’ll provide you with a high-level overview of bookkeeping to help you get started on your money-mapping journey. 

Benefits of Small Business Bookkeeping

No business owner wants to run into a nightmare scenario where they’ve lost track of expenses and start seeing red from all the chaos. Even if you’re not 100% open for customers just yet, it’s best to get a handle on bookkeeping as soon as possible. Why? Let’s take a look at the top five benefits:

1. Understanding your business’ financial health.

By staying organized and keeping score of your finances, you’ll have a better idea of your profits and losses, where you should invest more money to generate more revenue, quickly recognize any errors that you need to fix as soon as possible, and identify areas where you can pivot your strategies. 

2. Planning for growth.

Whether your business is product or service-based, your operations may start to grow faster than you expect. Before you know it, the demand has grown and maybe you’ve outgrown your location or need to get equipment or hire more employees.

3. Saving more money.

By tracking your expenses and revenue, you’ll have an easier time identifying areas where you can cut costs. You will also pocket the money you put aside to pay your CPA when it’s time to file your taxes. 

4. Stressing less at tax time.

Every type of business legal structure (sole proprietorship, general partnership, limited liability, and corporations) will vary in tax requirements, so it’s important to stay organized. Your CPA can help you get all of this straight with Uncle Sam when they have the numbers in front of them. Most of all, knowing that you’re being compliant with state and federal regulations can help you sleep better at night too.

How to Start Keeping Books for a Small Business 

As you can see, bookkeeping offers a great deal of benefits. But the most challenging part of bookkeeping for any business owner is getting started. It’s normal if you feel overwhelmed at first with all the new concepts and unfamiliar accounting systems. We’ll break down how to set up your small business bookkeeping step by step to help you get on the road to crunching numbers faster. 

1. First, get familiar with bookkeeping concepts. 

Before you can dive into managing your finances, which is a different world in itself, it’s important to orient yourself with some key terms. 

  • Chart of Accounts: Typically, you’ll have five main types of accounts that you’ll use to classify your transactions, which makes up your general ledger. These accounts are:
    • Assets: Resources owned by your business that has monetary value, such as equipment, inventory, and property.
    • Liabilities: Debts your business owes to someone else.
    • Equity: Your business’s assets minus its liabilities.
    • Expenses: The costs of doing business, such as operations and overhead.
    • Revenue: The money you’re earning by selling products or services. 
  • Accounts receivable: This involves estimating the total amount you expect to receive for your products and services.
  • Accounts payable: Like with any business, you’ll need to pay bills and invoices, so accounts payable involves making sure you pay those on time. 

2.    Decide if you’d rather use a single or double-entry system.

The next step is to learn more about how to record all your transactions and choose between two main systems, which is at the heart of your bookkeeping: 

  • Single-entry accounting: This involves recording all your transactions one time, either as revenue or as expenses.
  • Double-entry system: Like the name, this involves recording every transaction as one debit and one credit. The sum of every transaction’s debit and credit should equal zero, so this type of system helps reduce errors and provides more insight into your business’s financial health. 

Want to learn more about the difference between single-entry and double-entry? We can help! Schedule a consultation with a business advisor at SCCU today. 

3. Choose between manual bookkeeping and accounting software. 

Now that you have the basics under your belt and have chosen your entry system, it’s time to determine what bookkeeping method will work best for you. First, let’s take a look at the two main ways you can manage your business’s finances: 

  • Manual Bookkeeping: This means managing your finances the old-fashioned way with pen and paper, Excel or Google spreadsheets, or a notebook. As you can imagine, this can be time-consuming and result in data entry errors. 
  • Accounting Software: This involves a computer program that assists in accounting and bookkeeping tasks. Accounting software is available in cloud-based and desktop versions. While this may involve a learning curve, it’s a real time-saver in the end.

Both options have their pros and cons, but it’s important to keep in mind that manual bookkeeping may work in the short term as you’re getting started, but using accounting software will allow room for growth and set you up for future success. 

4. Learn more about bookkeeping through a variety of methods.

This article is only the tip of the financial auditing iceberg, so it’s a good idea to do a deeper dive into the concepts and methods that can better help you prepare your bookkeeping system. Many resources are available that can provide you with more information about the best methods specific to your industry.

Some resources include:

  • YouTube
  • attending free bookkeeping for small business course webinars like ours
  • reading software manuals
  • meeting with a bookkeeper or a CPA for assistance or advice
  • reaching out to a business advisor

5. Live by these strong bookkeeping best practices.

It’s a good idea to develop good habits regarding your finances, such as:

  • setting up a system regularly
  • recording all of your transactions
  • keeping all of your receipts

If you don’t have the time to do your bookkeeping yourself, consider hiring an experienced bookkeeper, which could even be on a part-time basis. 

Remember, you’re not alone. Meet with a business advisor at SCCU to learn how to set up your bookkeeping for your small business. 

About Business Services at SCCU | Meet with a Business Advisor

Want to get more hands-on experience to develop these skills? At Space Coast Credit Union, we have free pre-made bookkeeping spreadsheets that you can use! Reach out to us today to get access to these resources and how we can help you make them work for you. 

You can meet with a business advisor for FREE at Space Coast Credit Union to talk about how to grow your business. As long as you live or work in one of these counties, you can easily become a member at SCCU and meet with one of our business advisors! 

Our Business Services’ mission is to improve our business members’ chances of staying in business and thriving in business, by educating, equipping, and empowering them with access to resources and qualified Business Advisors. 

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