Small business bookkeeping basics are at the centre of all your accounting reports. Without basic bookkeeping, you will not keep control of your company finances and produce management reports.
Basic bookkeeping uses ledgers to record all the transactions. The ledgers are sales, purchases and general, read further information about bookkeeping ledgers.
Bookkeeping Basics 101
Why is Bookkeeping Basics so Important?
When running a small business, it is easy to forget to complete bookkeeping basics while you are concerned about getting the sales and delivering the goods or services on time. However, it is essential and should be kept up to date.
If you do not keep your bookkeeping up-to-date, you may miss invoicing a customer, forget to chase up a payment or end up paying bank charges if you go overdrawn.
Remember, whether you are self-employed or Incorporated at Companies House, it is a legal requirement to keep accounting records and store them for a minimum of six years. You can store paperwork as either a hard copy, on a hard disk or in the cloud. Most modern accounting packages allow you to upload transactions.
Bookkeeping Basics: How to Get Started
If you have never done bookkeeping before, you may find a couple of books that will help to get you started. Here is a selection of books we recommend to get you up to speed with all the basics:
These books are great for learning bookkeeping step by step. They are simple to read and are a useful ongoing source of reference.
Basic Bookkeeping Software for Small Business
There are several ways to complete the bookkeeping. Depending on your skills will depend on the best option.
Most people are familiar with books that are available from stationers. Each page has columns to record the transactions. This is the simplest method of recording transactions.
Setting up spreadsheets works well for a lot of small businesses. We have developed some free Excel templates to help get started. The templates include cashbook, petty cash, sales invoices, balance sheet, profit and Loss, mileage log and cash forecasting.
Accounting software will work for all businesses, from the small self-employed to the large companies. The problem is where to start finding the best solution. Our advice is to look at the business requirements; it might include stock, fixed assets, sales, purchases, etc.
Take out a free trial and look to see if the software has the features required. Two packages to look at are:
How often should I Complete Bookkeeping?
Decide how often you require your small business bookkeeping and accounting records. It may be that you prefer to do little and often, maybe each day set aside some time to ensure that your records are up-to-date.
A simple five minutes each day can be a lot easier to manage than half a day of headache at the end of each month.
If you are VAT registered, your business will need to provide sales and purchase history when the VAT return needs completing.
Your bookkeeping will provide business accounting basics reports – Financial accounts and management accounts. These accounts will help both you and other people make financial decisions regarding your business. The more up-to-date your books are, the better handle you will have on your business.
To help you understand bookkeeping basics, we have produced lots of bookkeeping examples. The examples include posting the double entry to sales, purchases, equity, depreciation, prepayments and accruals.
We also have an example of our simple to use cashbook; it is available to download.
Small Business Bookkeeping Basics Tips
If you are already up to speed with bookkeeping basics but in need of some tips to help you, here are a few tips to keep your books up-to-date:
Post all your bookkeeping transactions regularly – ‘little and often’ is a lot easier than batching everything up. It will save you both time and money – especially at the year-end.
Post all your expenses, however little they may seem. Each one will affect your profit and how much tax you pay.
Keep it simple – there are lots of tools available to help you. Simple Excel Bookkeeping templates and accounts software now make keeping your records simple and give you all the management information you need at the touch of a button. Find a system that works for you and stick with it.
Reconcile your bank – this ensures all your sales and purchase transactions are posted if you don’t already have a computer system to help you download our free Excel spreadsheets templates for cash book.
Reconcile your petty cash – if you keep petty cash, it is so easy to forget the small amounts you have spent. If you want some help with this, download our free, simple to use Excel spreadsheets templates for petty cash.
If using double-entry bookkeeping – ensure that if you make an entry on one account, you will need to make another entry on a second account. One example of this is if you receive a payment, you will need to increase your bank and decrease your accounts receivable (customers).
Bookkeeping Source Documents
Part of bookkeeping basics is the paperwork in bookkeeping is called accounting source documents. We look at the different documents from sales invoices to cheques. There is also advice on how to store the documents and upload them to accounting software.
Small Business Bookkeeping Tasks
There are many small business bookkeeping tasks to complete. We have produced guides with the basics on each topic;
Bank Reconciliation Basics
Completing a bank reconciliation ensures that all the transactions from the bank appear in the accounting system. Learn the basics of bank reconciliation, why it is so essential and how to complete it.
A cash book is an import part of a business. There are several different types of cash book available and include a simple single-entry book and a double-entry. We explain what a cash book is and the differences between them.
Claiming Business Expenses
Claiming business expenses helps to reduce the profits and, therefore, taxation. Learn about which business expenses you can reclaim and download our free Excel expense form template.
Credit Control Basics
Credit control is an essential part of any small business; learn how to request money from customers. Good credit control systems will help to improve the cash flow of your business.
If the business owns fixed assets, then depreciation will need to be accounted for. Learn the basics of how to calculate depreciation and the different methods to depreciate fixed assets.
Fixed Asset Basics
Includes fixed asset accounting, software, tracking, and how to value fixed assets. There are several different categories of assets, including computers, fixtures and fittings, buildings and equipment.
How to Account for Payroll
If you employ staff, a payroll system is required. A guide on how to account for payroll, including double-entry bookkeeping and options available for running salaries in your business.
Journal Entry in Accounting
Double entry bookkeeping requires two entries to the accounts. If a correction needs completing, a journal entry will be required. Examples and templates for journals including accruals and prepayments, are available.
Petty Cash Basics
Most Businesses use Petty Cash. The guide includes the basics of petty cash, implementing procedures, filling in vouchers, books and forms. It also includes a free Microsoft Excel petty cash template.
A purchase order may be required by a business to order goods or services from a supplier. Our article looks at purchase order procedures and includes a free template.
How to set up Sales Invoices, the basics to include on a customer invoice, how to file your sales invoices and free Excel invoice templates / free Word invoice templates. If there is a query with a sales invoice, a credit note may need issuing.
Statement of Account
Sending a statement of account to customers allows them to check that they have received all the invoices and credit notes. Download our free template and read the information.
What is Stock Control?
A guide on how to record, track and value stock. Download our free Microsoft Excel stock control sheet.
Where can I Learn Bookkeeping Basics?
If you wish to learn the basics of bookkeeping, there are a few alternatives: reading books and running through training exercises is an excellent way to get you up to speed with the basics quickly. An excellent online course is the Accounting Coach.
Alternatively, several courses are available – from bookkeeping for beginners, A-level Accounting or the more advanced accounting qualifications such as ACCA or CIMA.
Talk to your local college or look in your local library for bookkeeping and accounting courses. In the long run, if you are planning to do all your bookkeeping yourself, this may save you time and money.
Even if you are not planning to do your small business bookkeeping yourself, it is worth spending time learning the simple bookkeeping basics yourself to understand the basics of the bookkeeping records created for your business.
Should I hand my Bookkeeping to Someone else?
Handing your small business bookkeeping over to a professional bookkeeper or accounting technician can be useful for freeing up your time and getting an expert to provide you with your management accounting information.
There are lots of people out there who could assist you with your business bookkeeping. Read our guide on what does a bookkeeper do? To find out their duties and how to find a good one.
Excel Bookkeeping Templates
Excel Bookkeeping Templates
Check out our free Excel Bookkeeping Templates Including:
Petty Cash, Cash Book, Budgets, Balance Sheet and Sales Invoice
Below is an example of our Excel cashbook template, which is free to download and use.
How can I Complete Simple Bookkeeping?
There are several options:
If you don’t want to use a computer system, you can use some simple bookkeeping forms.
There are ledger books you can buy which will help, or you could start your own books. If you are after bookkeeping stationery for your manual records, Amazon can provide you with everything you need.
However, you will find that paper-based records are more time-consuming to complete and will not give you the same flexibility as a computer system when compiling management accounts.
Small Business Bookkeeping Software
There are many bookkeeping packages available, such as QuickBooks and Sage. There are even free bookkeeping software downloads, including Microsoft Office Accountant Express Edition and Pandle. Please have a look at our business accounting software review section for more information.
Starting a Home-Based Bookkeeping Business?
We have written a free simple guide to help people who are considering starting a home-based bookkeeping business.
They are written by a qualified accounting technician who has run a home-based bookkeeping business. The guide looks at the benefits and disadvantages of running your own bookkeeping business, how to find customers, and how to price yourself correctly. Please read our guide on how to start a bookkeeping business.
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