Maintaining accounting records for all your business expenses is what bookkeeping is all about. We here at the office, including most of the nerds, have a quick look at the Wikipedia answer:
Accounting in businesses includes recording financial transactions through bookkeeping. Individuals or corporations can make purchases, sales, receipts, and payments through transactions. Even though there are several standard methods of bookkeeping services, including the single-entry and double-entry systems, any process that records financial transactions is thus a bookkeeping process.
What is the Importance of Bookkeeping?
Irrespective of your profession, whether you are a freelance illustrator or a multinational automobile company, you need to implement proper bookkeeping procedures. Your method for keeping business records is entirely up to you, but you must maintain solid records of business transactions regardless of whether you use a 3rd party.
By not following the IRS’s rules, you could lose thousands of dollars in possible deductions and violate IRS regulations. Those who fail to do so might not only end up ineligible for deductions, but also end up owing money to the IRS.
How Should you Maintain a Good Bookkeeping Practice?
This article will not list a million items you should be doing, but will focus on some of the most common bookkeeping pitfalls, starting with unconfirmed transactions.
Transactions that are Not Reconciled
Have you reconciled all your transactions? All transactions occurring in 2015 must be correctly categorized before your books are complete. Can you help? Take a chronological approach.
Paying Back Loans
What is the status of your loan payments? It is possible the principal and interest portions of the payments were not properly accounted for. You probably have your books incorrect if you categorize the entire payment as one expense. Be sure to always include interest as well as the principle.
The Number of Items in Inventory
There may be errors in the cost of goods and inventory values in your books. The reason for this is usually a miscount, or, even more often, theft. Business owners with physical products should pay attention to this particular aspect. Keeping an eye on inventory is always a good idea, and December 31 is a good date for a thorough inventory check. Maintaining your books properly depends on a thorough inventory check.
Payroll
Your payroll needs to be truing, just like a bicycle wheel. This maintenance would require the income statement to show payroll at gross, however, the bank’s feeds could only show this account at net payroll without an adjustment.
Why Should I Take Care of My Own Bookkeeping?
You can decide whether or not to do your own bookkeeping by looking at a couple of factors.
Time:
It can be incredibly time-consuming and tedious to do bookkeeping. When you are in the early stages of your business, you are probably stretched thin–you might also be managing your sales, public relations, customer service, and inventory simultaneously. Starting a company means you understand what it means to hustle.
Specialties:
How many college courses does your accounting experience consist of? Did you ever get a chance to look up the tax codes that apply to you at the state and federal level? Have you ever heard of a term called “nexus”?
Some business owners believe they can take care of their own books independently, and this might very well be the case. However, most business owners tend to underestimate their accounting expertise.
There is a good chance you didn’t become a business owner for the purpose of practicing bookkeeping. By hiring a bookkeeper, you will be able to concentrate on the real reason you invested time and energy in your product.