Bookkeeping basics look different for small business owners than they do for accountants or bookkeepers. You have different priorities and responsibilities.
So, this is not gonna be a do-it-yourself blog. I’m not gonna teach you things like how to debit and credit and do journal entries and reconcile your bank accounts. There’s lots of free blogs and videos on the internet. A simple Google search will reveal those for you. We also have a blog series on bookkeeping to get you started if that’s what you’re looking for.
I personally don’t feel like as a business owner, you learning how to do those things is a good investment of your time. So, let’s jump into what basics of bookkeeping are important for you as the business owner.
#1 Basic Bookkeeping Skill
Number one, most basic of the basics, is you need to do it! It needs to happen. Whether you like doing it or not, simply get it done. You know as a business owner that there are some things you just have to force yourself to do and bookkeeping should be at the top of that list. However, that doesn’t mean you have to do it all yourself.
Don’t Do It
Um… look, I’m not trying to be offensive, but your spouse or child is probably not qualified to do your bookkeeping.
Find someone who is a trained accountant. If that happens to be your spouse or child, well lucky you. But we see a lot of small business owners where, by default, the spouse is kind of stuck doing this, or they hire one of their teenage or young adult children to do the books just because of the relationship.
And, you know, there’s a trust factor in the person, which is great. You trust them as a human, but you shouldn’t necessarily trust them with your books if they’re not accountants. It’s just with our clients who we see do that, there are so many mistakes in their books. So, don’t.
Leverage Your Cash
As soon as you have cash available to do it, I recommend leveraging that cash to free up time so that it is done properly. Again, if you can afford to do this from day one, I would just have a bookkeeper do your books for you. And if you’re just starting off, you’re a startup, chances are you can get away with a part-time hourly bookkeeper outsourced because they’re only going to spend two to three hours a month on your books.
Now as you know, as the business grows, the time commitment gets more involved. Right? For example, as a firm, we have thousands of payments that happen every month. So just because of the sheer volume of accounting that needs to be done we have one of our team members in the books very regularly, sometimes even daily. And some of those days, depending on when payments are hitting, it’s two to three hours to four hours on that day.
For most of our small business clients though, a monthly frequency is usually sufficient. You want to make sure that your books are getting done regularly.
Don’t wait. Don’t let it accumulate so that you’ve gone months, 6, 7, 8 months, years, without your books getting updated. A basic of using bookkeeping is that you should be able to look at reports regularly. And depending on how often you want to look at them, that could indicate how often you want your books updated.
Invest Your Time In…
But that’s where your time investment should be, learning and understanding how to analyze the financial reports. Not how to create the reports, not how to type in that you made a purchase at Home Depot or Best Buy. More of, I’m looking at a profit and loss statement, what does this mean for me? That’s a better use of your time and that’s a basic bookkeeping skill that as a business owner, you are going to want to have.
If you’re bootstrapping and you feel like you have to invest the time, go for it. Like I said, on the worldwide web, there’s a lot of free videos out there already on how to use, like QuickBooks Online, for example, they kind of dominate the market. Xero is another competitor in the space. QBO and Xero are probably the most popular right now. Feel free to do a demo and make the decision yourself on which one you prefer. Most of our clients use QBO.
Probably not maybe the basics you were looking for, but as an accountant in the industry for a very long time these are the bookkeeping basics you need to know as a business owner.
- You need to get it done.
- It’s better to leverage your money so that someone’s doing it properly.
- Don’t use a relative just because they’re your relative.
- Learn how to understand reports and how to analyze them.
Learning how to understand and analyze your financial reports is a great use of your time. Not so much the data entry of all your transactions.
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