How to Start Your Own Bookkeeping Business: Essential Tips

Besides the trial balance, you should regularly review your business bank accounts to make sure they agree with your ledger, a process called reconciliation. Accrual accounting means transactions are recorded even if cash hasn’t yet changed hands. For example, sales on credit are recorded on an income statement along with cash sales, even though payment will be collected later. Similarly for expenses, they are recorded even if no cash is exchanged. This means recording transactions and saving bills, invoices and receipts so you have all the data you need to run reports. Accounting software makes it easy to store these documents and reference them in case of an accounting error or audit.

To help determine your niche, you should also research the market to determine what bookkeeping businesses are already established and which industries they serve. A bookkeeper’s work is applicable across many different types of industries — after all, every business needs to track and optimize its finances. However, to help market your business and set it apart amongst the competition, you may decide to specialize in a specific industry. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided. We’ll look at how businesses commonly break up bookkeeping jobs between themselves and professionals. Like Xero and QuickBooks, Sage Business Accounting’s reports are user friendly and very easy to read.

QuickBooks Online: Best overall bookkeeping software

In contrast to most accounting software, Xero includes unlimited users at no additional cost. You can generate interactive financial reports any time and send them to your key financial collaborators, including business partners or tax advisors. To keep your books in order, Business.org recommends QuickBooks Online. Its detailed reports and straightforward interface make it a good software option for non-bookkeepers. Or, if QuickBooks’ high starting price keeps it out of your budget, Xero is our preferred runner-up. As one of the best bookkeeping software for businesses, Xero is highly affordable and comes with dozens of freelance-friendly features.

Tracking your expenses is an essential part of managing your finances. By keeping track of every dollar you spend, you can gain insight into where your money is going and make informed decisions about allocating bookkeeping for small business your resources. Tracking your AR, usually with an aging report, can help you avoid issues with collecting payments. Understanding your AR can also help you set efficient credit terms for your customers.

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Typically, checking accounts also come with a debit card for easy access to funds. Even if you aren’t planning on growing any time soon, you need to have a sense of how much money is coming in versus what is going out. On top of that, you need the data used in bookkeeping to file your taxes accurately.

These tools can also automate your recurring profits and costs, effectively freeing up more of your time. Each entry should include the transaction date, amount, and a brief description. Then the journal items are double-entered in the ledger as a debit and matching credit.

All-in-one money management

You want to be invoicing as soon as work is completed and accepted, and chasing any late payers persistently (but nicely). These financial records will be used later for your tax return, so accuracy is essential. Using “bookkeeping” and “accounting” interchangeably is common, but the two terms do have different meanings.

Though you may not work regularly with a tax specialist year-round, you’ll want to connect with one sooner rather than later so you’re not rushed come tax time. Your reports will look different depending on which you decide to use. We believe everyone should be able to make financial decisions with confidence. The debited account is the one that receives or loses value, and the credited account is the one that gives or gains value. The golden rules of accounting can help ensure that your bookkeeping is accurate and up-to-date.

So while Kashoo isn’t as comprehensive as competitors like QuickBooks, Xero, and FreshBooks, its customer service reputation is a definite point in its favor. Sage also offers a lot of support to first-time business owners with minimal bookkeeping experience. Its live Q&A chat lets you ask an expert financial questions during business hours, and you can always schedule an appointment with a Sage Accounting expert. When all of your transactions have been entered, you’re ready to run your financial statements. Start with an unadjusted trial balance, which can help locate any out-of-balance accounts. Now that you know the five main account types, you should begin to familiarize yourself with some other accounting basics.

• “Founders are typically smart, and [handling my own bookkeeping] is what I would do too,” she says.
• Bookkeeping begins with setting up each necessary account so you can record transactions in the appropriate categories.
• It’ll help you focus your business and run efficiently out of the gate.
• And sometimes it can be produced to include comparisons against the prior year’s same period or the prior year’s year-to-period data.
• Small businesses add just as much specificity and character to a community as its flora and fauna; they are the physical manifestations of the dreams and ambitions of our neighbors.
• Will your business be generating invoices, cost estimates, or billing statements?