Over 29% of small businesses fail because of low funds. The driving force behind this reason is usually because of faulty bookkeeping and misunderstanding the numbers.
If you’re a new business owner, surviving the first year of business can be the difference between stability and a premature close.
Use this pocket guide to learn bookkeeping for beginners. Knowing how to keep and understand the financials is essential for every business in any industry.
Choosing a Method
There are a couple of bookkeeping methods that are commonly used by small businesses. The double entry and single entry methods will help you stay organized, and it will help your account file taxes.
Look at the different benefits of each method to choose which one will work best for your business.
Single Entry Method
This system is the most basic financial recording process. Every transaction requires a single entry that will be used to match against debits and credits.
The single entry system doesn’t require professional skills, and it can be learned by anyone who can read, write, and do simple math.
Be wary that this method is subject to numerous errors and possible neglect. A business owner has to be dedicated to tracking every financial transaction or risk incorrect numbers.
Double Entry Method
The double entry system is the preferred method due to its thoroughness. Transactions are recorded twice, once to show the debit side and again to show the credit half.
Using this system makes it easy to spot mistakes and reconcile bank accounts. However, accounting backgrounds and skills are preferred to use this method.
The double-entry method also takes a little longer recording each transaction since it’s being entered twice.
Expenses and Revenue of Bookkeeping for Beginners
After you’ve decided on the method of bookkeeping, you’ll need to track every expense and revenue. There are several different software programs you can use to make your life easier.
Another thing to remember tracking the financials is to have receipts or proof of purchase. Without proper evidence of a transaction, your books become vulnerable to fraud.
Your organizational efforts will be up to your preference. Some businesses like tracking financial records by the vendor, others like organizing chronologically. Don’t try and mix and match your recordkeeping preferences or you’ll spend hours fixing it.
A business doesn’t have books to keep if there aren’t payments going out or revenue coming. Securing funding is a great way to get your bookkeeping started.
There are several options available for you to jump-start the books. A business owner can borrow money from family, open a line of credit, or apply for a business loan.
At the beginning stages of a business, you’ll need to spend more money than you make. Enjoy the ride of being your own boss and learn as much as you can from the early stages.
Open for Business
This starter guide won’t teach you everything to run a Fortune 500 company, but you can safely open for business. Understanding bookkeeping for beginners gives you the advantage over shop owners who aren’t organized.
Turn your small business into an empire with sound financial practices that will last a lifetime.
If you are ready to get some funding to test out your bookkeeping skills, then contact us today.