If you’re a budding entrepreneur with a phobia for accounting, don’t worry. You’re in good company. Very few business owners enjoy the process of bookkeeping, as it’s an exacting science that often requires significant industry experience for one to be able to do it efficiently and well.
However, any entrepreneur must still know how to do bookkeeping. Even if you do decide to go the outsourcing route, a basic understanding of everything that bookkeeping entails will ensure that whatever bookkeeping services you choose is doing their job to the fullest.
In this article, we’ll provide you with a quick guide of basic bookkeeping, hitting all the high points necessary.
Gather Information From Your Employees for Payroll
One of the most important parts of any bookkeeping regimen is paying your employees. Remember that your organization’s people resources are its lifeblood. If your employees are kept happy, they’ll grow your business. If they aren’t, then they’ll be unproductive at work, costing you their time. And they also may leave your company for other opportunities, costing you the recruiting expenses to backfill those vacancies.
One of the biggest factors to employee happiness is ensuring that they’re always paid on time. When you commit to paying your employees according to a certain schedule, you have to deliver because they’re counting on you.
The best way to ensure that never miss payroll is by getting all the information that you need to complete payroll ahead of time. Right in the onboarding process, you should make sure that your employees fill out the W-2s, W-4s, or any other tax and employment forms you need to ensure that you pay them the right amount of money. The last thing you want is to be running around a couple of days after payroll was due trying to get this info from your employees, who probably have other things on their plate to tend to.
Once you have all of the employee information together, it’s time to complete payroll. The first step to completing payroll is to select the right period. Too frequent and it’s just extra work for you. Not frequent enough, however, and you’ll have some disgruntled employees on your hands.
The industry standard for pay periods is every two weeks, so when in doubt just go with that.
Use Software to Invoice Customers (Especially if They’re Recurring)
One of the most difficult things to keep track of as an entrepreneur is all the accounts receivable. Your accounts payable, the vendors that you owe money to, will no doubt bug you about any payments that you have due. But someone who owes you money will certainly be sending you no reminders to invoice them.
That’s why it’s important that you look to technology to ensure that never fail to collect payment. Particularly if your business utilizes a recurring payment or subscription-based business model, any one of the many invoice software on the market can help you out by automatically sending your accounts payable the invoices they need to pay you for your product or service.
Never Fall Behind on a Payment to a Vendor
The flipside of this is accounts payable. As the bookkeeper, it’s your responsibility to make sure all payments are sent to vendors whenever they hit you up asking you for the money.
Paying vendors is often one of the least favorite tasks of an entrepreneur, but it’s an important task nonetheless. If you pay your vendors late, then you risk ruining relationships with them in the long-term, which does nothing but increase your expenses and bring down your reputation in the industry.
Keep All the Documentation
Whether it’s a receipt, invoice, or any other kind of financial documentation, keep it! Not only will having access to all this documentation help out when it’s time to close the books for the month, but it’s also a good failsafe to have up your sleeve should your company ever get audited by the IRS or any other governing financial body.
It’s impractical these days to keep physical copies of all financial documentation. That’s why you should use a simple scanner to upload everything to the cloud. Make sure that you create backups, however. There have been times when servers have failed and companies without a backup of their data have lost everything.
Leverage a Tax Expert to Reduce Tax Liability
When it comes to tax law, simply realize that understanding all the nitty-gritty of taxes is above your pay grade unless you have significant experience already in the industry.
Could you probably get by and figure out how to pay the IRS enough money every April? Sure.
But what you won’t be able to do is figure out all of the many tax loopholes and incentives that are available to organizations. A tax expert who has worked with many companies in your industry, on the other hand, will be able to do exactly that.
At the end of the day, it’s important to at least consider outsourcing as an option before you discard it completely. The right bookkeeping services can make your life as an entrepreneur infinitely simpler.
Take a look at it from the perspective of the law of comparative advantage. This economic theory states that someone who has significant experience in a certain task will be able to perform that task far more efficiently than anyone who hasn’t had the same level of experience.
So while it may take you two days out of the month to take care of all the financial responsibilities for your organization, it may take the right accountant only two hours. Thus, by hiring the right person, you’ve just put two days back into your daily life that you can use to focus on growing the business rather than simply maintaining its operations.
How to do Bookkeeping, Made Simple
The simple guide on how to do bookkeeping should have you ready to go as a do-it-all entrepreneur. If you’re not going the outsourcing route, then we wish you the best of luck!
For more startup advice, be sure to check out the rest of the articles on our website!