Firms require access to their financial data to manage cost, cash flow, and profit. It’s possible that you won’t be able to run your business efficiently if you don’t have access to accurate information. An accounting system’s information may help you manage your operations more effectively. This 2022 small business guide to Bookkeeping will help you achieve just that.

The most important reason to keep accurate records is to have information that can be used to make sound business decisions. The data produced by an accounting system can help you track costs, monitor revenue, and make informed choices about where to allocate resources.

Let’s have a look at what Bookkeeping is.

Bookkeeping is the process of recording and classifying financial transactions to provide accurate and up-to-date information about a company’s financial position. In simple terms, Bookkeeping is keeping track of all the money coming in and going out of a business. This information is then used to produce financial statements, such as balance sheets and income statements, which give an overview of a company’s financial health , and this 2022 small business guide to Bookkeeping will help you achieve just that.

Bookkeeping is an important part of any business, large or small, as it provides vital information for making sound business decisions. This 2022 small business guide to Bookkeeping will help you achieve just that.

Without accurate bookkeeping records, it would be difficult to know whether a business is making a profit or incurring a loss. Therefore, Bookkeeping is essential for the success of any business. It is important to note that Bookkeeping differs from accounting, and accounting is the process of interpreting, analysing and communicating financial information.

In other words, accounting is more concerned with using financial information to make decisions, while Bookkeeping is more concerned with recording that information accurately in the first place. Nevertheless, Bookkeeping and accounting are essential for any business to run smoothly and succeed, and this 2022 small business guide to Bookkeeping will help you achieve just that.

Ever wondered what a bookkeeper does?

A bookkeeper is responsible for maintaining financial records. This includes keeping track of income and expenses, preparing invoices and financial statements, and reconciling bank accounts. Bookkeepers typically work with accountants and other financial professionals to ensure that the organisation’s financial transactions are accurately documented. Bookkeeping has become increasingly automated in recent years, but it remains an essential part of any business or organisation.

A well-run organisation relies on accurate and up-to-date financial records to make sound decisions about where to invest its resources. Bookkeepers are vital in ensuring that these records are kept accurately and efficiently. This 2022 small business guide to Bookkeeping will help you achieve just that.

What does a bookkeeper do for a small business?

What’s involved in bookkeeping? Many small business owners mistakenly believe Bookkeeping is a tedious but necessary evil. However, the truth is that Bookkeeping can be a powerful tool for ensuring the financial health of your business. By tracking your income and expenses, you can get a clear picture of your money and make informed decisions about where to allocate your resources.

Additionally, regular Bookkeeping can help you to identify and avoid potential financial problems before they become serious. In short, by taking the time to keep accurate financial records, you can save yourself a lot of headaches down the road, and this 2022 small business guide to Bookkeeping will help you achieve just that.

Consider the people who have a stake in your company if you want to understand the importance of Bookkeeping. Investors, creditors, suppliers, and authorities demand accurate financial records relating to your firm. Maintaining up-to-date records might help you deliver a lot of that information. This 2022 small business guide to Bookkeeping will help you achieve just that.

Can Bookkeeping help you manage BAS compliance?

As a business owner, you must submit a Business Activity Statement (BAS) to the Australian Taxation Office (ATO) every quarter. This statement summarises your business’s taxable sales, GST collected, and any GST credits you are entitled to claim.

Keeping accurate records of your business transactions is essential for completing your BAS correctly. This is where Bookkeeping comes in. A bookkeeper can help you track your income and expenses, ensuring that all relevant information is included on your BAS. They can also help you calculate your GST liability and claim any credits you may be entitled to.

As a result, maintaining accurate bookkeeping records can play a vital role in helping you meet your BAS obligations. This 2022 small business guide to Bookkeeping will help you achieve just that.

Bookkeeping can assist with business financing.

Good Bookkeeping is essential for any business, large or small. Businesses can clearly understand their financial health by keeping track of income and expenses. This information is essential when it comes time to apply for loans or other forms of financing. Lenders will want to see detailed records of income and expenses to assess the risk involved in lending money to a business.

In addition, businesses that maintain accurate bookkeeping records are more likely to be approved for loans and other forms of financing. As a result, Bookkeeping can play an important role in business financing. This 2022 small business guide to Bookkeeping will help you achieve just that.

You can use Bookkeeping to help in decision-making

Any business owner will tell you that making decisions is a big part of running a successful company. From deciding which products to stock to setting prices and marketing strategies, countless choices must be made daily. But how do you know if you’re making the right decisions?

One helpful tool is bookkeeping. You can see your business’s financial health by tracking your sales, expenses, and other financial data. This information can be immensely valuable when making informed decisions about the future of your business. With Bookkeeping, you can ensure that your business is on the right track to success. This 2022 small business guide to Bookkeeping will help you achieve just that. Can I do my own bookkeeping for my business? Yes you can. You can also go for small business bookkeeping classes. and get a small business bookkeeping template and bookkeeping basics worksheet.

What is digital Bookkeeping?

In the past, Bookkeeping was a labour-intensive process that required hours of work with pencil and paper. Today, however, digital Bookkeeping has revolutionised how businesses track their finances. Using specialised software, businesses can automatically import data from banking and credit card statements, invoices, and other sources.

This data can then be categorised and used to generate financial reports. Digital Bookkeeping is more efficient than traditional methods and provides a more accurate picture of a business’s financial health. As a result, it has become an essential tool for any business that wants to stay competitive in today’s marketplace. This 2022 small business guide to Bookkeeping will help you achieve just that.

Advantages of digital Bookkeeping

There are many advantages of digital Bookkeeping. Perhaps the most obvious is that it is more efficient than traditional methods. You can search for specific transactions much more quickly, and you can generate reports with the click of a button. In addition, digital Bookkeeping is less prone to error. As a result, you can:

Digital Bookkeeping is a Streamlined System

You’ll have to keep records in numerous locations in a manual accounting system. The difficulty may not be recording the information but rather aggregating it and using it to generate a report or summary.

Even though manual accounting is well-knit, arranging the data and ensuring that everything fits nicely together is difficult. Balancing information in the trial balance may appear to be a straightforward process on paper; in reality, what lies behind it is inexplicable.

A digital accounting system makes things simpler for the owners and stores data in a particular location, allowing them to access important information and facts anytime. Critical financial information such as cash flow and balance sheets will be readily available in a few clicks in a digital accounting system. This 2022 small business guide to Bookkeeping will help you achieve just that.

Digital Bookkeeping Increases Data Security.

The modern business world runs on data. Businesses rely on accurate and up-to-date records, from sales figures to customer contact information, to make informed decisions. However, data is only as secure as the systems store it. Traditional paper-based record keeping is susceptible to loss and damage, making it unreliable for storing important information.

Digital Bookkeeping, on the other hand, offers several advantages regarding data security. Electronic records can be backed up and password-protected, making them much more difficult to lose or tamper with, and this 2022 small business guide to Bookkeeping will help you achieve just that.

In addition, digital bookkeeping systems can be monitored for suspicious activity, providing an early warning in the event of a potential security breach. As a result, digital Bookkeeping offers a more secure and reliable solution for businesses of all sizes.

Digital Bookkeeping Collects payments faster.

Digital Bookkeeping is a fast and efficient way to keep track of your finances. By tracking your payments and income electronically, you can quickly and easily see where your money is coming and going. This information can be invaluable in helping you to budget and save money.

In addition, digital Bookkeeping can help you to collect payments faster. By keeping track of your payments electronically, you can set up automatic payments and receive funds more quickly. This can be a big help if you are running a business or need to keep track of expenses. Overall, digital Bookkeeping is a great way to stay on top of your finances and collect payments quickly and easily. This 2022 small business guide to Bookkeeping will help you achieve just that.

Digital Bookkeeping Captures and organises receipts.

As any small business owner knows, keeping track of expenses is essential for maintaining a healthy bottom line. But let’s face it, sorting through a shoebox full of receipts is not exactly anyone’s idea of fun. That’s where digital Bookkeeping comes in. By capturing and organising receipts digitally, you can save yourself a lot of time and headache.

Plus, you can be sure that your records are always accurate and up-to-date. So if you’re looking for a way to streamline your expenses, consider switching to digital Bookkeeping. It just might be the best decision you ever make for your business. This 2022 small business guide to Bookkeeping will help you achieve just that.

Digital Bookkeeping Manages tax deductions.

Tax deductions can be complicated and time-consuming, especially for small businesses. With digital Bookkeeping, however, businesses can more easily track and manage their deductions. By keeping records of expenses electronically, businesses can save time and money on accounting and tax preparation, and it’s better than a manual bookkeeping for small business pdf.

In addition, digital Bookkeeping makes it easy to share information with tax professionals, ensuring that deductions are accurately calculated. As a result, digital Bookkeeping can be a valuable tool for managing tax deductions, and this 2022 small business guide to Bookkeeping will help you achieve just that.

There are many small business bookkeeping software, with Xero and QuickBooks the main ones.

Bookkeeping tips

Keep your personal and business costs separate

Many people make the mistake of blending their personal and professional expenses, which can make staying organised difficult and lead to problems come tax time. However, there are a few simple tips that can help you to keep your personal and professional costs separate.

First, open a separate bank account for your business. This will help you keep track of your income and expenses and make it easier to deposit customers’ payments.

Second, get a business credit card. This will allow you to make business-related purchases without wading through your expenses. This 2022 small business guide to Bookkeeping will help you achieve just that.

Finally, keep careful records of your business-related costs, which will help you maximise your deductions come tax time. These simple tips can avoid common pitfalls associated with commingling personal and professional expenses.

Choosing the right accounting technique: cash or accrual basis

Bookkeeping for small businesses is critical for maintaining financial accuracy and accountability. The most important part of Bookkeeping is choosing the right accounting technique for your business. The two most common techniques are cash basis and accrual basis, and this 2022 small business guide to Bookkeeping will help you achieve just that.

Cash basis accounting records revenue and expenses when cash is exchanged. This means that revenue is only recognised when received, and expenses are only recognised when paid. This technique can be very accurate for businesses with a lot of cash flow. However, it can also be more difficult to manage because it requires careful tracking of all cash transactions.

Accrual basis accounting records revenue and expenses when they are incurred, regardless of when the cash is exchanged. This means that revenue is recognised when earned, and expenses are recognised when incurred. This technique can be easier to manage for businesses that don’t have a lot of cash flow because it doesn’t require as much tracking of cash transactions.

Both techniques have advantages and disadvantages, so choosing the right one for your business is important. Whichever technique you choose, keep accurate records to stay on top of your finances. This 2022 small business guide to Bookkeeping will help you achieve just that.

You will enter two financial transactions that occur daily into your accounting system.

Expenses: You will enter expenses in your accounting system after reviewing the invoices and payments from your suppliers and going through their payment records. Keeping track of your expenditures might be made easier by reviewing past expenses.

Revenue: When an employee makes a sale, the transaction and the customer number are recorded in the ledger. After doing so, you can compile financial reports to determine which clients bring in the most money. This 2022 small business guide to Bookkeeping will help you achieve just that.

Sort your transactions by category

When dealing with a large number of transactions, it can be helpful to sort them into categories. This will make it easier to see where your money is going and to identify any areas where you may be overspending. Transactions can be sorted by type (e.g. bills, groceries, entertainment), by date (e.g. monthly, quarterly, annually), or by account (e.g. checking, savings, credit card). Once you have your transactions sorted, you can begin the bookkeeping process.

Bookkeeping involves recording all of your financial transactions systematically. This can be done manually or through the use of accounting software. Whichever method you choose, be sure to keep accurate records of all of your income and expenses. This will help you to stay on top of your finances and to make sound financial decisions in the future. This 2022 small business guide to Bookkeeping will help you achieve just that.

Decide between double-entry and single-entry Bookkeeping.

Regarding Bookkeeping, there are two primary methods: double-entry and single-entry. Both have their strengths and weaknesses, so it’s important to decide which one is right for your business. Double-entry Bookkeeping is more complex but provides a more holistic view of your finances.

With this method, you’ll need to track debits and credits for each transaction. This can be time-consuming, but it can also help you to identify discrepancies and prevent errors. Single-entry Bookkeeping is simpler, but it can be less accurate. With this method, you’ll only need to track one side of each transaction (either the debit or the credit).

This can save you time, but it also means you might not easily catch mistakes. Ultimately, the best bookkeeping method for your business depends on your needs and preferences, and this 2022 small business guide to Bookkeeping will help you achieve just that.

Set Reminders for Important Deadlines

As a small business owner, staying on top of your Bookkeeping is important. After all, keeping accurate records is essential for making sound financial decisions and ensuring you comply with tax laws. Fortunately, a few simple bookkeeping tips can help you stay organised and on track.

Set reminders for important deadlines, such as the due date for filing your taxes or the end of the fiscal year. This will help you avoid missing important deadlines and incurring penalties.

Create Regular Reports

If you want to get a handle on your business finances, one of the best things you can do is create regular reports. This can help you spot trends and identify areas where you need to make changes. At a minimum, you should create a monthly profit and loss statement, which will give you an overview of your monthly income and expenses.

You may also want to create a balance sheet showing your assets and liabilities. Once you have created these reports, take some time to review them carefully. Identify areas where you are spending more than you should or where your income is not meeting your expectations.

By creating regular reports, you can better understand your business finances and make more informed decisions about managing your money. This 2022 small business guide to Bookkeeping will help you achieve just that.

Basic accounting terms every business owner should know

A business owner must understand fundamental accounting terms to keep track of their finances. Regardless of whether or not they have prior experience with finance, proprietors of firms must be familiar with cash flow accounts receivable and liabilities.

The following is a list of 14 important accounting words that every company owner must remember.

Key accounting terms explained for small business owners

What are accounts receivable

Accounts receivable is the money a company owes customers for goods or services delivered but not yet paid for. Typically, a company will send out invoices to its customers and allow them a certain period of time to pay. The invoice will list the amount owed, the date when payment is due, and any applicable late fees.

Accounts receivable represent an important source of funding for many businesses, as they can use the money to finance their operations or invest in new projects. While accounts receivable can be a valuable source of funding, it’s important to manage them carefully to avoid running into cash flow problems down the road.

What are accruals?

Accruals are accounting entries that allocate revenue and expenses to the appropriate period, even if cash hasn’t exchanged hands. The basic idea behind accruals is that businesses should report income and expenses in the period when they’re incurred, regardless of when the cash is paid.

This approach provides a more accurate picture of a company’s financial condition during a particular period. For example, suppose a company provides services to a customer in December but doesn’t receive payment until January. In that case, the revenue should still be reported in December (when the service was provided) rather than January (when payment was received).

Similarly, suppose a company pays rent in advance. In that case, the expense should be reported in the period when the company uses the space, not in the period when it makes the payment. Accruals are important because they provide a more accurate picture of a company’s financial performance and position. Without accruals, companies would only report income and expenses when cash changes hands, distorting their financial results.

What are assets?

An asset can be used to generate value or future benefits. In financial accounting, an asset is any resource with the economic value held by an individual, company, or country. Common examples of assets include cash, investments, property, and equipment.

Intangible assets such as patents, copyrights, and trademarks are also considered assets. An asset can be either physical or financial. Physical assets include land, buildings, machinery, vehicles, and inventory. Financial assets include stocks, bonds, and other financial instruments.

The key characteristic of an asset is that it has the potential to generate future economic benefits. For this reason, assets are often listed on a company’s balance sheet. The value of an asset can decline over time due to depreciation, obsolescence, or changes in market conditions. When this happens, the asset is said to have negative equity or be “underwater.”

What is an audit?

An audit is an independent, objective evaluation of an organisation’s financial statements. Audits are conducted by certified public accountants (CPAs) who have no affiliation with the organisation being audited. The goal of an audit is to express an opinion on the fairness of the financial statements.

To do this, the CPA will review the organisation’s internal controls, account balances, and other financial information. If the CPA finds any irregularities, they will note these in their audit report. The audit report will also include the CPA’s opinion on whether or not the financial statements are free of material misstatement.

Audits are important because they assure investors and other interested parties that the financial statements are reliable. They also help to deter fraud and detect errors or irregularities.

What is a balance sheet?

A balance sheet is a financial statement showing a company’s assets, liabilities, and shashareholers at a particular time. The purpose of the balance sheet is to give shareholders and other interested parties an idea of the company’s financial health. The assets section of the balance sheet includes items such as cash, inventory, Accounts Receivable (money owed to the company by customers), and property.

The liabilities section lists items such as Accounts Payable (money owed by the company to suppliers), loans, and taxes payable.

The shareholder’s equity section includes items such as Common Stock, Paid-In Capital, and Retained Earnings. Together, these three sections provide a snapshot of the company’s financial position.

A balance sheet is an important tool for investors because it provides information about a company’s ability to pay its debts and make a profit. By looking at the balance sheet, investors can know whether a company is in good financial health or may be at risk of defaulting on its debt payments. Creditors also use the balance sheet to assess a company’s creditworthiness.

Generally, a strong balance sheet indicates that a company is financially stable and has a good chance of meeting its obligations. On the other hand, a weak balance sheet may indicate that a company is in danger of defaulting on its debt payments or is likely to have difficulty making a profit.

What is capital?

Capital refers to the total value of a company’s assets. This includes money that is invested, such as cash and investments, as well as property and equipment. A company’s capital is important because it represents the resources it can use to grow and expand its operations.

Equity is one type of capital representing shareholders’ ownership stake in a company. Debt is another type of capital, which refers to the money that a company borrows from creditors. Capital is also important because it protects creditors if a company goes bankrupt.

By understanding a company’s capital structure, creditors can assess the riskiness of lending money to the company and decide whether or not to extend credit.

What is Cash flow?

Cash flow is the lifeblood of any business. It is the money that comes in and out of the business daily. To keep a business afloat, it is essential to have positive cash flow. This means more money is coming into the business than going out. There are several ways to generate positive cash flow, such as selling products or services, investing in long-term assets, or taking out loans.

Without positive cash flow, a business will quickly become insolvent and be forced to close its doors. Any business owner needs to understand how to manage their cash flow.

What are COGS?

Cost of goods sold (COGS) refers to the direct costs of producing a good or service. This includes the cost of materials, labour, and overhead. COGS does not include indirect costs, such as marketing or shipping. Businesses aim to sell their goods or services for more than it costs them to produce them. By understanding their COGS, businesses can price their products accordingly and make a profit. Additionally, COGS can be used to track the efficiency of production.

If COGS decreases over time, the business becomes more efficient and makes more money. For this reason, COGS is an important metric for businesses to track.

What is depreciation?

Depreciation is the process of allocating such costs to successive accounting periods. Many companies use accelerated depreciation methods, whereby a greater portion of the asset’s cost is allocated in earlier years. This practice generally results in higher tax deductions in the early years, providing cash flow benefits.

Depreciation accounts for declines in the value of long-lived assets such as plants and equipment. The effects of depreciation are included in the operating results reported on a company’s income statement. For financial reporting purposes, depreciation expenses are generated by allocating the depreciable cost of an asset over its estimated useful life.

What are expenses?

An expense is a cost that is incurred in the course of running a business. Expenses can include operational costs such as rent, utilities, supplies, payroll, and marketing and advertising costs. Many businesses also have general and administrative expenses, which are costs associated with running the business but not directly related to its operations.

These can include legal fees, accounting fees, and insurance. Businesses must carefully manage their expenses to stay profitable. Several expense management methods include cost-cutting, cost control, and cost reduction. Businesses must also be aware of tax implications when it comes to expenses. In many cases, businesses can deduct certain expenses from their taxes, which can help them save money and increase their bottom line.

What is a general ledger?

The general ledger is system organisations use to record and track financial data. The system consists of a series of Ledger Accounts, each representing a specific financial transaction. For example, the Accounts Receivable ledger tracks money owed to the organisation, while the Accounts Payable ledger tracks money owed.

A general ledger is an important tool for financial reporting and decision-making, providing a complete picture of an organisation’s financial health. Additionally, a general ledger can identify trends and fluctuations in an organisation’s finances over time. As a result, this system plays a vital role in ensuring the accuracy and accountability of an organisation’s financial operations.

What is the gross profit margin?

Gross profit margin is a financial ratio that shows the percentage of revenue that a company keeps after subtracting the cost of goods sold. This metric is used to assess a company’s financial health and profitability. A higher gross profit margin indicates that a company is efficient in its operations and can generate more profits.

Conversely, a lower gross profit margin indicates that a company is less efficient and may struggle to generate profits. Gross profit margin is also used to compare companies within the same industry.

Gross profit margin can be calculated by taking a company’s total revenue and subtracting the cost of goods sold. This number can be divided by the total revenue to get the gross profit margin percentage. For example, if a company has total revenue of $100,000 and the cost of goods sold is $70,000, the gross profit would be $30,000. The gross profit margin would be 30%, considered average for most industries.

Gross profit margin is one metric that should be considered when evaluating a company’s financial health, and other ratios, such as operating expenses and net income, should also be considered. However, the gross profit margin can give insights into a company’s overall profitability and efficiency.

What are liabilities?

A liability is a debt or financial obligation owed by an individual or company. The debt may be in the form of money, goods, or services. Liabilities can be incurred in various ways, including through business transactions, personal loans, and credit card purchases. When liability is incurred, it becomes an obligation that must be paid back in full at some point in the future.

Depending on the terms of the agreement, this payment may be due immediately or spread out over time through instalments.

If liability is not paid off as agreed, it can damage the credit rating of the individual or company involved and lead to legal action being taken against them. Sometimes, liability may be forgiven if it cannot be paid back, but this is typically only done in extreme circumstances. Understanding and managing liabilities is important in running a business or household finances.

What is a profit and loss statement?

A profit and loss statement (P&L) is a financial statement that summarises the revenues, costs and expenses incurred during a specified period, usually a month or quarter. The P&L statement is one of the major indicators of a company’s financial health and performance.

The purpose of the P&L statement is to give management an idea of where the company is making and losing money to making informed decisions about improving profitability. The P&L statement also provides information that can be used for tax purposes, financial planning, and forecasting.

The P&L statement typically includes three elements: revenue, expenses and net income. Revenue represents the total income generated by the company during the period. Expenses represent the cost of goods sold, operating expenses and other costs incurred during the period. Net income is the difference between revenue and expenses. If net income is positive, the company has made a profit; if it is negative, it has lost money.

What is revenue?

Revenue is the income generated from business activities, such as sales of goods or services. It is also referred to as sales, turnover, or gross income. Revenue is the top line item on an income statement and is often used to measure a company’s financial performance. Net income, calculated as revenue-less expenses, is a more accurate measure of profitability.

However, revenue is still important because it provides insights into a company’s sales trends and growth potential. For example, suppose a company’s revenue is increasing, but its expenses are also rising. In that case, that could signify that the company is growing rapidly and may need to invest in additional resources. In addition, if a company’s revenue declines suddenly, that could signal that something is wrong with the business and that corrective action may need to be taken.

In conclusion

Whether you do your Bookkeeping or get a professional, follow these bookkeeping basics for small business for more accurate and up-to-date records.

Contact the Ingrams Accounting team today if you need help with your Bookkeeping.

This information is general and prepared without considering your objectives, personal or business circumstances, financial situation, or needs. Because of this, you should, before acting on this information, consider in consultation with your adviser its appropriateness, having regard to your objectives, personal or business circumstances, financial situation and needs.

Cathy Sheppard
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