Accounting & Bookkeeping 101: For Entrepreneurs Who are Scared of Numbers
Accounting and bookkeeping for entrepreneurs: Are you one of those business owners who hate looking at their bank statements? If you’re in business to make money, why wouldn’t you want to look at your numbers? Have no fear: you’re not alone. Money is a huge stress factor for business owners because they get confused over the bookkeeping aspect of a business.
Avoiding your bank statements will not make your financial problems disappear. However, the only true way to plan your business and earn your wealth is to know and understand your financial statements. Read on to learn the basics about bookkeeping and accounting for entrepreneurs.
Tip #1: Choose a Bookkeeping System for Entrepreneurs
You have a choice of handwritten ledgers, computer software, or hiring a bookkeeper. Unless you have a degree in Accounting, handwritten ledgers can become confusing and difficult to update if you fall behind. I would recommend researching the multitude of bookkeeping software titles available. If you want to hire someone, take your time to plan an interview process and check references, even if you hire a local firm that will assign someone to handle your records.
Tip #2: Do Your Accounting & Bookkeeping Regularly
If you’re not ready to hire a specialized bookkeeper for entrepreneurs, choose one day a week or twice a month to log your receipts. Your expenses will be nominal for those with online businesses; those with physical locations will have much more overhead, which makes regular, accurate bookkeeping even more important. Please don’t wait until two months before the tax deadline to take out a shoebox of receipts and start entering them.
Also, reconcile your bookkeeping records with your bank statements monthly. Keeping a regular bookkeeping schedule also diminishes the chances of duplicate entries or entries being logged into multiple or wrong accounts. All this wreaks havoc at tax time to so do it right from the start.
Tip #3: Know the Bookkeeping & Accounting Jargon
Whether you’re using software or a real-life bookkeeper for entrepreneurs, knowing what the different bookkeeping and accounting jargon means will further your understanding of how profitably your business is running. Know the difference between Accounts Receivable and Accounts Payable.
Keep accurate inventory counts of your physical products (this is often the only way to know if you’re a victim of theft). Knowing the difference between Employee and Independent Contractor means a world of difference when calculating Payroll Taxes.
Tip #4: Make Detailed Notes For Your Future Bookkeeper & Accountant
You enter into your books for every transaction and add a detailed note—no more guessing games at tax time. Enter the reason for the expense, person or company, etc. Also, avoid using acronyms in the notes. While it makes sense to you now, it may look like a foreign language in the future or to a new bookkeeper or employee.
Tip #5: Keep Personal Expenses, and Business Accounts Separate
This may seem like common sense, but I can’t say it enough. If you use PayPal for your business payments, do not pay personal expenses with that same account. The same is true if you have a business checking account at your local bank. Don’t use that account to pay your gas bill.
Boost Profit With Accounting & Bookkeeping For Entrepreneurs
The more you know about your company’s financials, the more power you have to fix any problems and steer the ship toward more earnings. You built your business for it to be profitable. Embrace the bookkeeping practice so you can better understand your profit margin and run your company more smoothly.
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