The Beginner’s Guide to Bookkeeping

One great way to establish a bookkeeping system is to invest in accounting software like QuickBooks or Xero. While reviewing your financial statements, you can track your cash inflows and outflows and overall profitability. You may decide to allow your waiters to keep their gratuities, and then tip out a certain percentage to support staff.

Kaleigh Moore, a content writer with over six years of freelancing experience, recommends keeping at least $2,000-$5,000. As your business grows, you will come to realize that spreadsheets aren’t the best option when it comes to maintaining your financials. Just picturing the number of tabs I’ll accumulate in three years fills me with dread.

Assign Transactions to Specific Accounts

According to ZipRecruiter, as of July 2021, the average annual pay for a freelance bookkeeper in the United States is $55,094 a year. This works out to be approximately $26 an hour, over $1,000 a week, or $4,600 a month. Of course, rates and salary can vary depending on the person’s education, certification, skills, years of experience, and other factors.

You can expect most bookkeepers to maintain the general ledger and accounts while the accountant is there to create and interpret more complex financial statements. Bookkeeping is a critical part of managing your business’s financial health. A bookkeeper records and organizes financial transactions to ensure accurate reporting of your business’s income and expenses.

How to do bookkeeping for a small business

Without recording these transactions in your books, you’d forget to reclaim that hard-earned money. Finding the right person to suit your business’s needs may also take some time and effort. This makes tracking income and expenses easier by eliminating the manual aspect of recording transactions. When you’re properly tracking your business income and expenses, it makes it easier to manage your financial resources.

Bookkeepers track the materials and goods purchased for the business in the purchases account. You use this to calculate the COGS, and you subtract it from sales to determine the company’s gross profit. While bookkeepers can sit for the CB exam sections in any bookkeeping 101 order, AIPB recommends taking part one before scheduling part two. To maintain certification, you need to earn at least 60 continuing education credits every three years. Managing the general ledger is part of your daily responsibilities as a bookkeeper.

Best Free Accounting Software for Small Businesses

A proper financial data management system can provide valuable, actionable insights and prevent problems, such as skimming fraud. As a bookkeeper, you oversee the first steps of the accounting cycle, while an accountant typically handles the last two. The size and scope of a business will determine whether the company needs a part-time bookkeeper, full-time specialist bookkeeper, or an entire accounting department. Some bookkeepers focus solely on “write up” work, which basically consists of compiling the books quickly, usually for tax preparation purposes. Other bookkeepers provide “full-charge” services and can even serve as a financial controller for your company. By learning bookkeeping basics—with the help of bookkeeping courses—you can keep your business on track and set yourself up for success.

Assets are what the company owns such as its inventory and accounts receivables. Assets also include fixed assets which are generally the plant, equipment, and land. If you look you look at the format of a balance sheet, you will see the asset accounts listed in the order of their liquidity. Asset accounts start with the cash account since cash is perfectly liquid. After the cash account, there is the inventory, receivables, and fixed assets accounts. Firms also have intangible assets such as customer goodwill that may be listed on the balance sheet.

Aside from the Balance Sheet, bookkeepers also create the Income Statement. You also need to ensure that all transactions concerning these three are correctly recorded in the right journal or document. As of 2021, approximately 1.7 million people worked as bookkeeping, accounting, or auditing clerks. The BLS expects the field to have a 5 percent decline in growth from 2021 to 2031. Still, you should see 197,600 job openings each year over the next decade [3]. A few employers offer on-the-job training for bookkeepers by providing internships and placement programs.

For instance, the job outlook for accountants and auditors has a 6 percent growth rate from 2021 to 2031. The median salary for these roles is also higher than for bookkeepers at $77,250 per year [4]. It’s important to note that not all lenders and investors require certified or audited financial statements. And even if you’re not looking for funding, consider asking an accountant to review your financial statements at least once a year. One of the advantages of using accounting software is that much of the reconciliation process is completed by simply linking your bank accounts to your software of choice.