While software has replaced the leather-bound ledgers of the past, bookkeeping is still an essential task for modern business owners.
Here’s how it works – and why it’s so important.
Accurate, up-to-date financial records are vital for running a small business. They let you keep tabs on spending, help you plan and budget, avoid cash-flow issues and identify payment issues that could be costing you money.
Even more important, well-kept books are a must when it comes to completing accurate tax returns and working with lenders.
- Recording means keeping a record of every incoming and outgoing transaction.
- Reconciling involves checking transaction data against bank statements to make sure everything matches up. This helps you identify errors or late payments – or in some cases, fraudulent activity.
Bookkeeping in a small business also includes accounts receivable, accounts payable and payroll – that is, sending outgoing invoices, paying incoming bills and paying staff.
Simplifying bookkeeping with software
In the past, business owners recorded sales in a ledger, kept paper receipts for business purchases, and cross-referenced bank statements by hand.
Now, accounting software can take on many of those tasks.
- Recording sales: information flows straight from a point-of-sale or invoicing system into accounting software.
- Tracking purchases: business purchase data can be automatically recorded.
- Reconciliation: is quicker and more accurate.
- Invoicing and bill payments: can be automated.
Need help getting your books under control? Get expert bookkeeping support from our accounting team, now.