Bookkeeping 101: Basics for Entrepreneurs

Bookkeeping is one part of the accounting process and refers to keeping a complete list of financial transactions and copies of corresponding records of proof, like receipts. Unless you are very experienced, you’ll need to hire an accountant to help with other aspects of accounting, such as preparing tax forms, but you can handle day-to-day bookkeeping yourself.

To get started: find an accountant, choose a software program, create a working system, and then regularly update your “books.”

5 Software Options:

Even the smallest businesses use software for bookkeeping. These programs will automate parts of the process and keep you more in touch with your business. When choosing software it’s a good idea to speak with your accountant, because they can help you assess your needs and they may prefer working with some programs more than others. You can start your software search by checking out these five options:

  1. Quickbooks Desktop and web versions available. Web pricing starts at $12.95/month for a single user account.

  2. Wave Web version only. Accounting and invoicing applications are free. Designed for businesses with 9 employees or less.

  3. Xero Web version only. Starts at $9/month for multiple users with a limit of 20 bank transactions per month.

  4. Kashoo Web version only. $49/year for a single user and $199/year for multiple users.

  5. Outright Web and mobile versions are $9.99/mo, but is a very simple program.

4 Steps to Create a System

It may make both of your lives easier if you and your accountant make these decisions together.

  1. Categorize. Every transaction entered in your books will need to be categorized, so you’ll need to decide which categories (also called accounts) you will use and when. Examples: web sales revenue, shipping expenses, marketing expenses.

  2. Organize. Since you must keep copies of all receipts, contracts, invoices, and agreements for your business, you’ll need to design a system for organizing these records, whether you plan to go paper or digital.

  3. Reconcile. Decide how you will reconcile, or review your records for accuracy.

  4. Update. Set a schedule for updating and reconciling your books.

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3 Mistakes to Avoid

  1. Including too little detail. Aim to keep books and records that someone else could easily understand.

  2. Not backing up your files. Just do it. You can back it up with an external drive, or using a cloud based service like Dropbox.

  3. Not separating business and personal finances. You should set up a company bank account and credit card and use them for all business related expenses. If you must use your personal account for a business expense, reimburse yourself from the business to maintain separation and make sure every business expense appears in company records.