You’ve started a business? Congratulations.
Your business has found its feet in 2019, and now it’s ready to run in 2020.
Problem is, when your business does well, you make more money.
“Wait - how’s that a problem?”
Sure, you can’t complain about raking in the cash…
But you should be aware that when you start making more money, you have a growing responsibility to stay in control of it.
You need a bookkeeper.
No idea what a bookkeeper is?
No idea what they do?
Not to worry.
My most recent client was exactly the same!
Read More: Wikipedia on Bookkeeping
They had just gotten their small graphic design off the ground, and had just landed 2 big clients.
Success imminent - money incoming!
But when that money came in, they panicked.
They had no idea on how to do their own bookkeeping. They didn’t even know that they had to do bookkeeping!
Lucky for them, I had the answers.
All of ‘em.
And that’s why I’ve written this article!
I’ve brought together everything you need to know about bookkeeping:
- What bookkeeping is
- The different types of bookkeeping for different types of business
- The basics of bookkeeping for your own business
- The tools to help you do your bookkeeping
- And how to hire a bookkeeper
Money makes the world go around.
It’s the first rule of business - and that means keeping hold of it is pretty important…
And bookkeeping seeks to do just that.
Bookkeeping stabilises and regulates the financial cash flows within your business.
“Sorry, Amber, you’re gonna have to slow down…”
That was my client 7 months ago.
They knew how to whip up a book cover within minutes.They knew how to make a Pinterest post go viral.
But they didn’t know how to produce an income statement.
I get it.
And that’s why we’re going to take things step-by-step.
And if you’re still unsure about bookkeeping, outsourcing or hiring a bookkeeper to take this off your hands is probably the option for you.
(And by probably, I mean most definitely!)
Yet before I get you tangled up in why it’s so important for your business, let’s start with the basics:
Bookkeeping is the process of recording all financial transactions of a business. Said transactions include purchases, sales and receipts.
Read More: A beginner's tutorial for bookkeeping
A bookkeeper is the person that carries out these responsibilities.
This process is a part of accounting.
Accounting and bookkeeping often get mixed up as they overlap each other.
However, accounting is the process, measurement, and presentation of the information.
Here are some of the responsibilities involved in bookkeeping:
Establishing chart of accounts
Verifying, allocating and post transactions
Maintaining general ledger
Balancing general ledger
Maintaining historical records
Preparing financial reports
Compiling with government requirements
These tasks can either be carried out by someone within the business such as yourself, or a bookkeeper.
Once I’d talked these tasks through with my client, it came to light that one of their team had experience of aligning finances to government requirements.
So, when I found them a bookkeeper that would match their money needs, they could reduce their costs and streamline the process by having that component done in-house!
That’s why I always advise my clients to consider their bookkeeping as a whole before taking a snap decision on their next step.
The fact is, it’s a necessary step that comes with a necessary price tag.
But that doesn’t mean the costs can’t be cut!
You thought bookkeeping was complex?
Well, it’s about to get a bit more complicated.
Okay, fine, a lot more complicated.
Let’s take things slow, then:
No two businesses are the same, are they?
So, why would their accounting be?
That’s why I deemed it fit to detail the different bookkeeping needs for the different types of business, from their size, to their industry.
This was actually the first thing I did with my client.
Once I’d read their email - expletives included - I set up a Skype call with them.
Within 2 minutes of talking (and some rather poor reception), I knew what they’re business needed.
That’s right; within 120 seconds I knew that as a SME they needed this type of bookkeeping with that type of bookkeeper!
And I’m going to tell you exactly what I knew…
1. Small to Medium Enterprises
Small businesses - as they have less complex and fewer transactions - are suited to a small team or one person performing their bookkeeping duties.
This can include freelancers or virtual assistant bookkeepers.
Single-entry bookkeeping should also be used for small businesses as this system records cash sales and business expenses that are paid when incurred.
This form of bookkeeping is not common among most businesses as the bookkeeping entries under this system don’t match transactions to the corresponding accounts. This can make tracing any revenue and expenses difficult.
Many small businesses use bookkeeping software as they are simple, user-friendly, and can handle bookkeeping functions for those with limited bookkeeping knowledge.
Also, small businesses should opt for cash accounting as opposed to accrual accounting. This means you record a transaction when cash changes hands.
Read More: Small-Business Bookkeeping Basics
2. Big Or Growing Businesses
As there will be a higher number of transactions made with bigger businesses, the nature and scale of the bookkeeping will increase in both size and complexity.
It follows that in-house bookkeeping should be used by such businesses due to the constant support on hand, and the greater amount of support of offer with a team devoted to your business.
This is especially true given the need for accuracy when running such big numbers.
Double-entry bookkeeping should also be used with big businesses or businesses that collect their income through accounts receivable and receive merchandise and inventory or credit.
Growing or bigger businesses should opt for accrual accounting when purchases or sales are recorded immediately, even if the cash doesn’t change hands until later.
My client might have only just started out, but when they landed those big clients - so big that I’m legally not allowed to tell you who they are - they were officially on the up!
And this growing business needed their bookkeeping to align with their needs.
I made sure that double-entry bookkeeping was on their radar, and provided them with a team of bookkeepers who ran their numbers and left them to do what they do best:
Making Photoshop magic!
Aside from the business sizes, the business in question also matters.
Restaurants, for example, require inventory management and insight into total monthly operational costs, whereas manufacturers need invoice and expense tracking.
So: you now know what bookkeeping is.
And you also know the type of bookkeeping you need for your business.
But - as said before - it is common for small businesses to take on their own bookkeeping.
That means it's best you actually know what’s expected before you realise your maths knowledge just won’t make the cut!
Remember my client? That’s what happened to them!
Their IT guy had legal experience, meaning they could assess their accounting needs in a better light and reduce their costs.
Nevertheless, once I’d taken them through the rest of their potential tasks, we came to the conclusion that they had no chance of tackling their bookkeeping.
None. Zilch. Nada.
And that was great!
How’s that great?
By determining what they could - and couldn’t - do, I could align their bookkeeping needs with a potential solution. And that solution was a team of bookkeepers.
But now it’s over to you:
Here are the basics behind bookkeeping.
Could you handle it?
Balancing the books
This involves assets, liabilities, and equity.
Assets are what the company owns, such as inventory and accounts receivable.
Liabilities are what the company owes such as business and bank loans, and other debts.
Equity is the ownership that an owner or any investors have in the firm.
The equation to balance the books - AKA the accounting equation - is:
Assets = Liabilities + Equity
This statement covers revenue, expenses, and costs.
Revenue is the income a business receives from selling its products or services.
Expenses are the amount spent to run the business, such as salaries.
Costs are the total a business spends to manufacture a good or service.
This is the process that explains the difference between the bank balance shown on a business’ bank statement, and the corresponding amount in the business’ accounting records.
This is the method of allocating the cost of a tangible or physical asset over its life expectancy.
Claim business expenses
This allows you to reclaim some of your expenditures.
Fixed asset accounting
Fixed assets are recorded on part of your balance sheet. They need to be written off or depreciated over time.
You will need to account for payroll. This can be done through payroll software, or through the calculators and information HMRC provides.
Adjusting the ledgers is required when you need to transfer an amount of money from one account to another.
Sales and purchases invoices
It is a legal requirement that a sales invoice be raised when a product or service is sold to a customer.
A purchase invoice is when you buy something from a supplier - you need to make sure there are no mistakes.
Whew - that’s a lot on your to-do list!
DIY might be a cost-effective measure, but it can both consume your time and threaten the accuracy of your calculations.
And neither of them add up to a successful business!
I’ll be honest:
I hate Excel.
I can just about do my 4 times tables.
(On a good day.)
And I always overtip in restaurants ‘cause I can’t do 12% in my head.
Thing is, how much I give my waiter isn’t as important as your business having incorrect bookkeeping.
So, are you prepared to do your own calculations for your business?
Are you ready to tap the calculator app, and put the business’ finances in your hands - and your hands alone?
Alternatively, you could opt for bookkeeping software, and leave the calculations to the computer.
That’s exactly why I’ve decided to make things that much easier for you.
I’ve brought together the top-rated bookkeeping software, and compared them.
All you have to do is tap ‘download’!
Reviewers loved the software for small businesses, and claimed it was one of the best for client experience.
The ability to have one place for everything was also rated highly.
Their customer service was the most popular feature of this software, with problems being quickly fixed in mere minutes.
The up-to-date nature of this older service was also popular.
The simplicity of this software has earnt it this rating, but it seems to be one of the few positives of this tech solution.
The 14 day free trial was also popular among users.
Pricing starts at ||$||28.66||$|| a month for the most basic service.
Pricing starts at ||$||5.37||$|| a month for the essentials.
Pricing starts at ||$||16.61||$|| - this is the only price or package to choose from.
With a user-friendly interface and integratable with a variety of popular services, this is a simple yet useful service.
This is considered the leading accounting software for small and medium-sized businesses
The multi-currency support makes this software stand out and optimal for businesses that operate around the world.
Remember my client?
They asked me about software in the first email they sent me.
And having deciphered their wall of text, I immediately started doing the maths on potential software to suit them.
But given the size of their business, I crossed this option off the list due to the small scale businesses often served by this software.
Could software work for your business?
Chances are you’re still confused about bookkeeping.
You aren’t entirely sure what they actually do, and you aren’t entirely sure why they do it.
But if there’s one thing for sure, it’s this:
Under no circumstances will you ever want to do your bookkeeping.
You don’t trust yourself to complete an income statement, let alone input the numbers into an app…
(Tell me about it!)
Lucky for you, that’s an option.
That’s right - you can hire actual people to do it: bookkeepers or accountants, or a virtual assistant bookkeeper.
Fully trained and raring to go, they can take care of everything money-related, leaving you to get on with what you know best.
Here’s all the benefits of outsourcing your bookkeeping or hiring a bookkeeper:
No more errors
We all make mistakes.
(I know I do.)
But making mistakes when it comes to your finances won’t just irritate your employees, clients, and suppliers.
It may end up costing you in terms of fines and penalties, or even a loss of sales.
Staying within the law is a key component of a bookkeeper’s responsibility, leaving you to get on with what you do best and be sure that you’re sticking to the law of the land.
When my client first emailed me, they sent me a sheer cliff of text. Their anxiety-riddled ranting was down to a fine of ||$||1000||$|| they had incurred for an error in their bookkeeping.
Houston, we have a problem.
They’ve had their bookkeeping team for 5 weeks now, and any mistakes are easily picked up on.
Stick to deadlines
I know that I’m no good at sticking to a schedule.
What about you?
Do you always have an eye on the clock?
Do you keep to your deadlines?
If the answer is ‘no’, then a bookkeeper is for you.
As they take care of all your financial matters, and are trained in what they do, they know the deadlines they have to meet.
Deadlines met means no fines or penalties incurred.
And that means drinks are on you!
Increase your efficiency
When my client first contacted me, there was one resounding message that they underlined, italicised, and put in bold:
“I’m a graphic designer - not a bookkeeper.”
So, when I secured them a bookkeeping team, they were left to get on with what they did best.
When everyone’s good at what they do, they do it better and faster.
And when they are better and faster at what they do, the efficiency is improved for the whole business.
Understand your business’ financial position better
You might know your business inside out, but I doubt you know business finance on the same level.
That’s why you should hire a bookkeeper.
Given their financial know-how and business experience, they can determine the position of your business financially.
They can even advise you on the next steps you should be taking, providing a helping hand you need to succeed.
It was this financial support that increased my clients profits by 27% within the first month when they hired this team.
I’ve convinced you, haven’t I?
You want someone to take the weight of your finances off your shoulders.
You want someone to point you to your next step in your business.
Well that’s why I’ve taken things one step further.
I’m going to show you how to hire a bookkeeper.
1. Virtual Assistant Bookkeeper
You can either put up a job posting, tweet out your need for a VA bookkeeper, or check out the online agencies.
Scroll through, and see which one will suit your business best based on their experience and past projects.
And click ‘hire’ for the one you like the most!
2. Compare bookkeepers
Chances are, if you’re looking for a bookkeeper, you’re in a bit of a pickle.
You’ve probably realised you have a lot of bookkeeping to do yourself, and not that much time to do it in.
In that case, you could go on the internet and research the different bookkeepers…
And then you’d have to work out which ones will suit your business…
And then you’ll have to compare their prices and reviews…
And then you’d have to make the final decision…
That’s a lot to do.
3. Get a quote from us!
We can find you the best bookkeeper to suit your business and its needs.
And we can even find you the cheapest one, saving you both time and money!
“Hold on - it’s that easy?”
Just fill out a form, and tick that off your to-do list.
So - you know what bookkeeping is and how you can do it for your business.
And you even know the type of bookkeeping your business needs.
Or, you can leave that all to us and get back to business!
Read More: The Top 25 Accountancy Blogs UK
Now it’s time to hear from you:
Are you ready to give up bookkeeping?
And which task are you ready to throw the towel in for first?