Alright, let’s get real. Bookkeeping isn’t exactly the most exciting part of running a small business, but it’s definitely one of the most important. Think of it like keeping score in a game—if you don’t know where the money’s coming from or going, you can’t win. The good news? It doesn’t have to be complicated. Let’s break it down.
What Is Bookkeeping, Really?
Bookkeeping is just a fancy way of saying “keeping track of your money.” It’s the process of recording every dollar your business makes or spends. Whether you’re selling cupcakes or fixing cars, the basic idea is the same: you need to know how much money is coming in (income) and how much is going out (expenses).
Example:
Let’s say you own a food truck. On a good day, you make $1,000 selling tacos (income). But you also spend $300 on ingredients and gas for the truck (expenses). At the end of the day, your bookkeeping will show you made $700 (profit). That’s it. It’s really just basic math.
Why Does Bookkeeping Matter?
You might be thinking, “Why should I care about bookkeeping? I know if I have money in my account, I’m good.” But it’s not that simple.
Here’s why bookkeeping matters:
1. Taxes – The government wants a piece of your pie. Proper bookkeeping makes it easy to figure out how much you owe when tax time comes.
2. Cash Flow – You need to know if you have enough money to keep things running. You can’t pay bills or employees with guesswork.
3. Growth – Want to expand your business? Buy new equipment? Hire more staff? You’ll need to know if you can afford it. Bookkeeping helps you figure that out.
The 3 Key Tasks You’ll Do in Bookkeeping
You don’t need to be a math genius to do bookkeeping. These are the three basic things you need to keep track of:
1. Record Your Transactions
Every time you make or spend money, write it down. This can be done with software like QuickBooks or even just a simple spreadsheet. You need to track:
• Income (money coming in)
• Expenses (money going out)
• Invoices (money you’re owed)
Think of it like keeping receipts for everything. If you buy supplies for $50, write it down. If you make $200 from a big sale, write it down.
2. Reconcile Your Accounts
This sounds more complicated than it is. “Reconciling” just means checking your bank account to make sure your records match what’s actually happening in your account. If your records say you spent $500 on supplies, your bank account should show $500 spent on supplies.
Imagine it like balancing a checkbook (remember those?). It’s about making sure nothing’s missing, and you haven’t forgotten any expenses.
3. Create Basic Reports
At the end of the month, you should create a simple report that shows:
• Profit (how much you made after expenses)
• Losses (if you spent more than you made)
You can do this with software like QuickBooks Online. This will help you see where your money is going and if you’re actually making money.
Example:
Let’s say you made $10,000 this month but spent $7,500 on rent, supplies, and wages. That means you have $2,500 profit. Not bad, right?
Tools That Can Help
You don’t have to do all of this by hand. There are a bunch of tools that can make your life easier. Again, while there are a few programs out there, as a QuickBooks ProAdvisor, I must promote QuickBooks Online. They have different tiers, for your specific business needs.
Common Mistakes to Avoid
• Mixing Personal and Business Expenses: Keep your stuff separate from your business. Don’t buy groceries with your business account and don’t pay for business supplies with your personal card.
• Not Tracking Everything: Every dollar matters. Don’t let small expenses slip through the cracks. They add up!
• Not Backing Up Your Records: If you’re keeping things on your computer, make sure to back them up. Imagine losing all your financial records—yeah, not fun.
Bookkeeping might sound like a hassle, but it’s essential for running a successful business. Once you get into the habit, it’s not that hard. Just remember to keep track of every dollar, check your bank account regularly, and review your profits and losses at the end of the month.
You don’t need to become an accountant overnight, but a little bit of bookkeeping can go a long way. Think of it as setting yourself up to win the game—because who doesn’t like winning? If you have any questions or are looking for a bookkeeper, give me a call at 717.503.3564 or email at dannagmcintire@gmail.com.