Whether you keep your small business accounting books on paper, through computer software, or hire an accountant or bookkeeping expert, proper bookkeeping practices are important to the operation and survival of any business. Without them, your business is susceptible to not only cash flow issues, but potential legal problems as well.
Small business accounting and business bookkeeping serves two purposes – to enable the IRS to evaluate your operations, and to help manage your business. Your books make up one very important part of your overall business records and should include all transactions made by your business. As a standard practice, several pieces of information should always be kept in your books.
Revenues and Expenses
How much money is going out, where it’s going, and what money is coming in are all questions that can be answered by recording the revenues and expenses of your business transactions. Records can be maintained through a journal, a popular method that details receipts and expenses, or a ledger, a method that records transactions as credits and debits. Records are an absolute for every facet of small business accounting.
Important to record the cash your business spends so you’ll have an accurate number of expenses each year. Writing reimbursable checks or keeping petty cash records are both valid methods of documenting cash expenditures.
Maintain records of all inventory to prevent stealing and misplacing merchandise, keep inventory holdings to a minimum, and track business trends. Dates purchased, stock numbers, purchase prices, dates sold, and sale prices are all relevant information for inventory records.
Accounts Receivable and Payable
Always keep track of what customers owe you and what debts you owe others. It’s prudent to record as much data as possible including invoice dates, numbers, amounts, terms, dates and amounts paid or due, balances, and client information.
Hiring even one employee invokes your responsibility to file and pay forms and payroll taxes. Employers are responsible for maintaining employee forms such as the W-4 (Withholding Allowance Certification) and the I-9 (Employment Eligibility Verification). You are responsible for maintaining records on withholding, employer matching, unemployment, and worker’s compensation.