What is bookkeeping?

When you think of bookkeeping, does the image of a person behind a desk going deep into the numbers with a calculator and a mountain of receipts come to mind? Well, modern-day record keeping for your business doesn’t have to look like that. We’ll walk you through the answer to “what is bookkeeping?” – and why it matters for a small business owner. Bookkeeping is an important concept to understand. In short, that’s because it’s the mechanism for painting a clear picture of how you earn and spend money as a business. Read on for insight.

Bookkeeping definition and purpose

Bookkeeping is the financial underpinning of a business. It involves the meticulous record-keeping of all small business transactions. Furthermore, it helps you gauge the financial vitality of your business by tracking expenses and revenue.

What are bookkeeping duties?

Bookkeeping duties include documenting:

• Asset records
• Bank transactions
• Bills
• Credit purchases
• Financial transaction reports
• Payroll records
• Purchase orders
• Receipts
• Sales invoices

You can track your finances by hand, in a spreadsheet, or through bookkeeping software. There are a few bookkeeping methods – namely single- and double-entry bookkeeping.

• Single-entry bookkeeping involves making one entry per transaction of incoming or outgoing funds. Single-entry bookkeeping tracks cash transactions, taxable income, and tax-deductible expenses.

• Double-entry bookkeeping is when you enter your financial transactions using two categories. It has two entries per transaction—a debit and a credit. The debit is recorded in one account and the credit is recorded in another. Double-entry bookkeeping helps reduce errors. It also best indicates a company’s financial growth because you have the clearest picture of what money is coming in and out of your business.

While many small business owners start out handling their books on their own—they soon realize it can take a lot of know-how, effort, and time. Bookkeeping is often among one of the first tasks business owners choose to outsource to an external pro. If you are looking to get professional help with your books, Block Advisors’ small business bookkeeping service can help. Get direct support from account managers. Let our experts take on the day-to-day paperwork so you can focus on your business – and what you love.

Not quite ready to jump to a full-service option, but don’t want to completely DIY it? An alternative option is to use a bookkeeping software such as Wave to track income and expenses, manage cashflow, and keep track of your business’ health. Guided software is often seen as a cost-effective middle ground between going it alone and getting the help of a dedicated professional.

What does good bookkeeping mean?

What does bookkeeping mean – and why does it matter to your business? Bookkeeping is an integral part of your business’ evolving story – and there are several reasons why it matters to keep good financial records. Here are a few:

1. It helps you forecast your business’ needs. Whether it’s planning for future purchases or hiring employees, understanding money coming in and out is helpful.
2. It enables you to track important financial information at any given time. Investors, customers, lenders, and even the IRS could request financial records at any point, so it’s important this information stays organized.
3. It ensures you’ll make timely payments of rent/mortgages, loans, taxes and bills.
4. It will help you evaluate your small business’ performance. Better understand if your company is growing, stagnant, or declining. This information can help inform future business decisions.
5. It helps you give a view of how your business is performing year over year.
6. It aids your business in staying compliant with taxes and streamlines the tax filing process.

What does a bookkeeper do for your business?

It takes expertise and time to handle your small business’ bookkeeping needs. Working with a bookkeeper with the right expertise means you have more confidence your books are accurate. Working with a professional also helps preserve your time. Time that you previously would have carved out of your workday to manage your books can be redirected to other tasks and priorities.

If you’re like most business owners, you didn’t set out to become a master bookkeeper. You’d rather dedicate yourself to the revenue-generating portion of your business. If this is resonating with you, you may consider outsourcing bookkeeping tasks to seasoned experts.

See how our bookkeeping professionals can help with your bookkeeping needs and answer any questions you may have.

Schedule a free bookkeeping consultation.

This article is for informational purposes only and should not be construed as legal advice. You may want to seek the advice of an attorney to evaluate all relevant considerations.