For all businesses, there are three essential bookkeeping tasks.
- Accounts Payable
- Accounts Receivable
- Reconciliation
Accounts Payable Process
Above is a visual graphic of the Accounts Payable process. It’s a straightforward process where the bookkeeper works with your business and senior accountant to process vendor payments. It’s important to include either you, as your company’s owner or employee, in the approval process to ensure accuracy. The senior accountant serves as another layer of security and a way to double-check that all payments going out are correct per your business’s management team.
To Summarize, the tasks are
- Enter and Categorize Bills
- Review for Accuracy
- Prepare Check Runs
- Process Payments
Accounts Receivable Process
The Accounts Receivable Process involves a few more steps to ensure your business stays on top of the money you’re owed. Much like the Payables process, this one will include the senior accountant and your business’s management team to ensure accuracy.
To Summarize, the tasks are
- Bill Customers
- Process customer payments
- Record deposits
- Follow up on past-due invoices.
Reconciliation
It’s important to reconcile your bank and credit card accounts at the end of every month to know which transactions haven’t cleared.
When you review your bank statement and its closing balance, you can compare it to what hasn’t cleared to learn your actual balance.
Doing the bank reconciliation requires using the module in the accounting software to reconcile accounts. If you instead only check things off on the register, you won’t know what transactions are outstanding.
FAQs
Q1: What is bookkeeping? A1: Bookkeeping is the process of recording, organizing, and maintaining financial transactions and records of a business.
Q2: Why is bookkeeping essential for small businesses? A2: Bookkeeping helps small companies to keep track of their financial transactions, monitor cash flow, prepare accurate financial statements, and comply with tax regulations.
Q3: What are the essential bookkeeping tasks for small businesses? A3: Essential bookkeeping tasks for small businesses include recording income and expenses, reconciling bank statements, managing accounts payable and receivable, and maintaining general ledgers.
Q4: How often should I update my books? A4: It is recommended to update your books regularly, ideally daily or weekly, to ensure accurate and up-to-date financial information.
Q5: Should I hire a professional bookkeeper or do it myself? A5: It depends on the complexity of your business and your accounting knowledge. Hiring an experienced bookkeeper can save you time and ensure accuracy, but if your business is simple, you may be able to handle basic bookkeeping tasks yourself.
Q6: What software can I use for bookkeeping? A6: There are various bookkeeping software options available, such as QuickBooks, Xero, and Wave. Choose software that suits your business needs and budget.
Q7: How do I track my business expenses? A7: To track business expenses, keep receipts, invoices, and other relevant documents. Categorize expenses and record them in your bookkeeping system regularly.
Q8: What is bank statement reconciliation? A8: Bank statement reconciliation involves comparing your recorded transactions with those listed on your bank statement to ensure accuracy and identify any discrepancies.
Q9: How do I handle accounts payable and receivable? A9: For accounts payable, keep track of invoices received from vendors and schedule payments. For accounts receivable, issue invoices to customers and track payments to ensure timely collection.
Q10: How can bookkeeping help with tax preparation? A10: Accurate bookkeeping ensures that your financial records are in order, making it easier to calculate and report your business income and expenses for tax purposes.