When you think about book-keeping, you automatically think that you have to have study accounting in order to handle it.
With a little guidance here and there, any business owner can handle it. It is simply organizing your financial transactions in clear and conscience manner. Below are some of the things you need for successful book-keeping.
Create Book-Keeping Accounts
Not bank accounts but dockets into which money in the business flows in and out. They vary from one business to the next depending on factors such as size and the nature.
The five common accounts for any business are:
- Assets Account – used to record cash and resources owned by the business.
- Creditors Account – it records debts the business owes.
- Revenue Account – money earned by the business mainly through sales is recorded here.
- Expenses Account – money to pay for products and services needed to run the business is recorded here.
- Capital Account – amount remaining after liabilities have been deducted from assets.
Start Using Your Accounts For Your Book-Keeping
In the past, the records were kept in hard copy. Nowadays, spreadsheet software such as excel is common. It is also the most affordable.
To automate your book-keeping, you can use modern software such a POS software, cloud accounting system like sage erp etc. Read more about small business automation from our previous article.
To avoid any sort of confusion, it is paramount to ensure that you record every transaction in the correct account. For example, if you are purchasing new machinery for your business, both cash and equipment accounts will be affected.
They both still are asset accounts. It will be like converting an asset from one form to another. These transactions keep a balance and you can account for every penny at the end of the day.
Every business balances their books after sometime. Maybe annually or quarterly. When balancing, the debit and credit accounts should be equal. Otherwise, it would indicate wrong entries or neglect to enter some of the transactions.
Conclusion
Preparation of financial records is the best way of keeping track of the business progress.
Statements such a balance sheet, a profit and loss statement and a cash flow statement will be used as a yard stick to measure the financial health of your business. Ensure you stick to a regular schedule in bookkeeping.
We recommend using a mobile POS system if you are running on a tight budget that would not allow for investing in a fully fledged enterprise system.