It is not a good idea for a business owner to handle bookkeeping. You must maintain track of all receipts, comprehend cash flow, and prepare tax reports. Instead, you should hire a professional accountant or bookkeeper. But first, you need to understand the main distinctions between bookkeeping and accounting. As a result, we’ll go over the basics of small business bookkeeping and accounting in this blog.
Services in Accounting and Bookkeeping
Both occupations entail recording financial transactions and keeping track of the company’s financial health, but there are some distinctions.
What are the Benefits of using Bookkeeping Services?
Accounting is built on the foundation of bookkeeping. Daily spending tracking, bank account reconciliation, financial record keeping, and expense categorization are among the administrative activities required. Payroll management, invoice management, and supplier payments are all part of bookkeeping services in Perth. As a result, bookkeepers are responsible for many other parts of a firm. However, you can automate small business bookkeeping and save a lot of time.
What are Accounting Services?
The financial information provided by a bookkeeper serves as the foundation for the accounting process. Various accounting services in Perth will include financial statement preparation, cost analysis, and ensuring that the organization is ready to file tax returns.
An accountant can also offer budget advice and assist in the planning of future investments. If you want to take care of your small business’s accounting needs, you may either automate the process or hire someone to do it for you.
One thing to keep in mind is that as a business owner, you should learn about GAAP, or Generally Accepted Accounting Principles. It is not a law, but it will assist you in measuring and presenting your company’s finances.
Some Helpful Hints Before You Start a Small Business
Prior to establishing an accounting and bookkeeping system for your Perth-based small business, you should first complete the steps listed below.
1. Create a Separate Business Bank Account
Keeping your personal and business finances separate by opening a separate bank account for the firm helps simplify your accounting. Otherwise, keeping track of the company’s cash flow will be quite difficult. To open a business account, you must provide an EIN or social security number, as well as a certificate of good standing and other information.
2. Organize all of your Company’s Records
According to the ATO’s recommendations, you should maintain your tax records for at least five years. You may have to preserve them much longer for insurance companies or creditors. As a result, maintain copies of receipts, bills, invoices, tax returns, and payment proofs.
3. Basic Accounting Terminology
There are a few basic accounting phrases that you should be familiar with, including:
- Revenue/income – the amount earned
- Expenses/expenditures – the expense incurred
- Accounts payable – The corporation owes money.
- Accounts receivable – money owed to the business.
- Assets, like land, stocks – The company’s own equipment.
- Liabilities, debts like loans –
- Equity – When liabilities have been removed from assets, the residual value
- General ledger – full records of business transactions
- Chart/accounts – List of accounts and transaction categories.
- Journal entry – used to update the ledger
- Trial balance – The balance of all accounts is shown in this accounting report.
Understand the Three Types of Financial Reports
You should be aware of three different sorts of financial reports.
1. Balance Sheet
This report summarizes all of the assets, equity, and liabilities for a certain time period.
2. Income Statement
The income statement records the company’s expenses and revenues for a certain time.
3. Cash flow statement
It is reported in cash flow how much money came in and went out over a specified time frame.
4. Create an Accurate Accounting System using a Simple Accounting System
As your business expands, you will face more challenges. As a result, it will be beneficial to be aware of the various options available to you for the accounting system.
5. Understanding the Difference Between Cash and Accrual Accounting
Cash-based accounting requires you to record monetary transactions only when you get paid. It is better suited to small business inventory management since it provides a clear picture of cash flow. In an accrual-basis method, however, you must record transactions whenever they occur. It may be appropriate for controlling inventories in start-up businesses.
6. Making Use of Accounting Software
Accounting software will help you balance your books. In the current digital age, there is a lot of competition. Therefore, it’s best not to rely on manual data entry methods.
Simple Ways to Make Bookkeeping Easier
You can streamline your bookkeeping using one of two methods.
1. Receipt scanning software
Receipt scanners can store receipts for you, but you should be aware that they can malfunction at any time.
2. Using commercial banking services
This service will give you reminders when it’s time to upload the receipt.
Now that you’ve seen how helpful it is to have accounting & bookkeeping services, the next step is to locate the proper one for your company. There are a variety of accounting services that can help you take control of your business’s destiny by delegating some of your responsibilities.
For additional information, contact Finaccountants.