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Do you feel confident taking care of your small business bookkeeping?<\/p>\n\n\n\n
If not, you\u2019re in the majority.<\/p>\n\n\n
![\"\"](\"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-content\/uploads\/2021\/09\/01-Statistics-Finances-accounting.jpg\")
<\/a><\/figure>\n<\/div>\n\n\nA whopping 60%<\/a> of small business owners feel they aren\u2019t knowledgeable when it comes to finances and accounting.<\/p>\n\n\n\n Yet many of them do it anyway.<\/p>\n\n\n\n Approximately 72% of business owners take care of their own accounting tasks<\/a>, which can range from basic bookkeeping to the full end-to-end process, including filing taxes.<\/p>\n\n\n\n Whether you take care of your own books or have an accountant do it for you, it pays to understand your business finances.<\/p>\n\n\n\n That way you\u2019ll have greater visibility over potential problems, such as cash flow (which, by the way, is a key factor in 82%<\/a> of small business failures), as well as potential money-saving opportunities.<\/p>\n\n\n\n In this guide, we explore why it\u2019s worth taking a closer look at your small business books and how you can do so, easily and effectively.<\/p>\n\n\n\n Disclaimer: Alliance Virtual Offices does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice.<\/em><\/p>\n\n\n\n Bookkeeping is the process of accurately recording and tracking a company\u2019s financial transactions-something that\u2019s especially crucial for remote businesses <\/a>that may be managing finances across different locations.<\/p>\n\n\n\n What are the basics of bookkeeping?<\/p>\n\n\n\n Think of it this way:<\/p>\n\n\n\n Every business earns money, and every business spends money. Bookkeeping keeps track of it all.<\/em><\/p>\n\n\n\n Bookkeeping focuses heavily on day-to-day financial transactions.<\/p>\n\n\n\n This focuses largely on accounts receivable (money in) and accounts payable (money out). This is crucial, as these numbers give the business owner visibility over their business finances rather than simply showing immediate profits.<\/p>\n\n\n\n However, bookkeepers may also manage other tasks.<\/p>\n\n\n Here\u2019s a breakdown of the main small business bookkeeping tasks:<\/p>\n\n\n\n Bookkeeping shares a lot with accounting. However, the two aren’t exactly the same.<\/p>\n\n\n\n The process of bookkeeping is heavily focused on day-to-day financial transactions. It involves a lot of data entry and cross-referencing.<\/p>\n\n\n\n Bookkeeping will cross over with accounting in many ways, but there are a few key differences.<\/p>\n\n\n\n Bookkeeping is managing the day-to-day financial transactions of the business\u2014updating spreadsheets, reconciling bank statements, and processing payroll. Accounting is more about financial supervision: Taking the documents prepared by bookkeepers and using them to think strategically about the company\u2019s financial health and growth.<\/em><\/p>Fundera<\/em><\/a><\/cite><\/blockquote><\/figure>\n\n\n\n What does an accountant do for a small business?<\/strong><\/p>\n\n\n\n Accountants traditionally take more of an advisory role within a business. An accountant manages a business\u2019s books, creates financial reports, and files taxes for the business.<\/p>\n\n\n Here are some of the key roles of a business accountant:<\/p>\n\n\n\n Some accountants carry out additional tasks, such as auditing.<\/p>\n\n\n\n To do this, they need to be a Certified Public Accountant (CPAs), which means they are regulated by their state board of accountancy.<\/p>\n\n\n\n The CPA designation distinguishes licensed accounting professionals committed to protecting the public interest. These professionals offer financial statement audits and other attestation services to help inform investors about the financial health of organizations. – <\/em>AICPA<\/em><\/p>\n\n\n Approximately half of all registered accountants in the U.S. are CPAs. According to the Accounting Institute for Success<\/a>, there are roughly 1.3 million accountants in the US and approaching 665,000 CPAs.<\/p>\n\n\n\n If you\u2019re wondering, do I need an accountant for my small business?<\/p>\n\n\n\n For many small businesses, it\u2019s not necessary to hire an accountant. However, it depends on the size and complexity of your business, your growth aspirations, and how much time you can dedicate to bookkeeping.<\/p>\n\n\n\n Remember that accountants don\u2019t just handle company finances.<\/p>\n\n\n\n Accountants can also offer advice about your legal structure, developing a business plan, seeking credit, business growth, franchising, buying or selling a business, and more.<\/p>\n\n\n The two types of bookkeeping are single-entry<\/strong>, which is sometimes used by very small businesses and the self-employed. The other is double-entry<\/strong>, which is more accurate and enables organizations to track their financial performance more efficiently.<\/p>\n\n\n\n Here\u2019s a brief overview of each:<\/p>\n\n\n\n Single-entry bookkeeping<\/strong> is often used by very small businesses and self-employed people for simple transactions. It\u2019s a record of transactions like cash, tax-deductible expenses, and taxable income.<\/p>\n\n\n\n It\u2019s known as single-entry because only one entry is made for each transaction, similar to using a personal checkbook. In one column, income is recorded as a positive while an expense is marked as a negative amount.<\/p>\n\n\n\n It\u2019s not efficient for large or complex businesses, as it doesn\u2019t track transactions such as inventory, and it can\u2019t be used to develop a balance sheet. This system provides a much more accurate set of accounts and enables business owners to track asset and liability accounts, and closely monitor profit and loss.<\/p>\n\n\n\n Bookkeeping isn\u2019t just about making records and checking off payments.<\/p>\n\n\n\n It has a higher purpose: to keep a watchful eye on your business finances and ensure enough money is flowing in to match expenditure, and facilitate growth.<\/p>\n\n\n\n Big picture, efficient bookkeeping gives you an accurate overview of your small business\u2019s progress and financial health.<\/p>\n\n\n\n When you know exactly where your money is going, you can make better budgeting and strategic decisions. For instance, whether to apply for business credit.<\/p>\n\n\n\n Overall, efficient small business bookkeeping can help you plan and set a path for financial growth.<\/p>\n\n\n\n Here are 4 more reasons why bookkeeping is important for small businesses:<\/p>\n\n\n Separate business and personal finances.<\/strong><\/p>\n\n\n\n It\u2019s important to keep all business and personal finances separate. This way, you will have a more accurate representation of your small business finances. More importantly, depending on your business structure, a clear divide means you may not be personally held liable for any debts or issues related to your business.<\/p>\n\n\n\n Clear separation between your personal and business finances is also important in the event of an IRS audit. Even if you\u2019re fully compliant with IRS tax laws, you could be audited. If you do face an audit, having a clear paper trail and organized financial records will enable you to easily answer any questions the IRS may have about expenses, income, losses, tax deductions, tax returns and more.<\/p>\n\n\n\n \u201cAn audit puts the burden of proof on you to disclose your business expenses and income. Keeping good records saves you from having to dig through a huge box of receipts to figure out which purchases were for business and which were for your personal expenses. Keeping your business finances separate also reduces your legal liability and can help you manage your tax and business bills more efficiently.\u201d – <\/em>Intuit Quickbooks<\/em><\/a><\/p>\n\n\n Streamline tax processes.<\/strong><\/p>\n\n\n\n Regular, consistent record-keeping and tracking streamlines your tax processes, and reduces any last-minute scramble to meet the tax filing deadline.<\/p>\n\n\n\n Because your business already has detailed records in place, reporting is made much simpler. When you keep on top of your business finances through organized bookkeeping, you have more time to accurately calculate deductions, and also work more efficiently with any tax professionals.<\/p>\n\n\n This also reduces the possibility of human error. By managing your transactions and reconciliation, and by giving yourself time to do so (rather than leaving everything until the last minute) you can more easily identify any mistakes. Catching mistakes sooner rather than later saves a lot of time and worry later on.<\/p>\n\n\n\n Provide accurate records for credit applications.<\/strong><\/p>\n\n\n\n One important role of bookkeeping is that it can support any business funding applications you may decide to make in the future.<\/p>\n\n\n The organizational element of bookkeeping demonstrates to potential lenders that you\u2019re on top of your finances, which helps instil trust and credibility. Plus, it means all required records are organized and easy to find.<\/p>\n\n\n\n Free up time to focus on your business.<\/strong><\/p>\n\n\n\n By keeping on top of your business finances, you\u2019ll have peace of mind knowing your books are in order. This not only frees up your time as tax deadline looms, but also means any financial statements or documentation you might need for effective planning is easily and quickly to hand.<\/p>\n\n\n\n How do you do bookkeeping for a small business?<\/p>\n\n\n\n There are three main ways you can manage bookkeeping for your small business:<\/p>\n\n\n\n Research<\/a> suggests that accountants only handle 25% of accounting tasks for small businesses and the self employed.<\/p>\n\n\n\n The remaining 75% do their own accounting, with around 64.4% of small business owners making use of accounting software to help them.<\/p>\n\n\n\n It comes down to personal choice and preference.<\/p>\n\n\n\n However, as your business grows, it makes sense to consider all available options to ensure your books are accurate and up-to-date.<\/p>\n\n\n\n Here, we\u2019ll dig into these three methods and the pros and cons of each.<\/p>\n\n\n\n It\u2019s common for self-employed people and very small business owners to take care of their own bookkeeping, particularly when starting out.<\/p>\n\n\n\n However, this can change as the business grows and the business owner takes on more work and responsibilities.<\/p>\n\n\n\n On the plus side, managing your own books puts you in a position of control. You have visibility over your finances and can keep a close eye on money coming in, and money going out.<\/p>\n\n\n It saves costs too, as you\u2019re not paying for a bookkeeping service or a professional to do it for you.<\/p>\n\n\n\n Considering most startups make use of personal equity, traditional debt, and their own personal savings<\/a>, it\u2019s easy to see why cost-saving is a top priority.<\/p>\n\n\n\n In fact, for truly small businesses, bookkeeping can sometimes be accomplished with nothing more than a spreadsheet.<\/p>\n\n\n\n To help with the process, consider using a small business bookkeeping template. Here are some examples<\/a> for Excel.<\/p>\n\n\n\n However, bookkeeping can be tedious and time-consuming — especially if you\u2019re new to it.<\/p>\n\n\n\n Spending time managing your own financial records takes you away from your core business. When time becomes short or you\u2019re under pressure to meet client deadlines, it\u2019s easy to let your bookkeeping duties fall behind.<\/p>\n\n\n\n When this happens, mistakes creep in.<\/p>\n\n\n\n This can lead to costly problems.<\/p>\n\n\n\n Always keep in mind that your small business could face an audit by the IRS, at any time.<\/p>\n\n\n\n If that happens, you must be able to answer questions about your financial records. If there are mistakes or holes in your bookkeeping, your business could be fined.<\/p>\n\n\n\n Not only that, it will cost you time to put the problems right — and you may need to hire a professional to help.<\/p>\n\n\n\n And if clients hear that you\u2019ve been pulled up by the IRS, it could cost your reputation, too.<\/p>\n\n\n\n That\u2019s not to say that managing your own books is the wrong decision. But, be fully aware of the responsibilities that come with it.<\/p>\n\n\n If you\u2019re intent on managing your own small business books, here are some tips to help:<\/p>\n\n\n\n We strongly advise furthering your bookkeeping knowledge and skills to ensure your processes are accurate and compliant.<\/p>\n\n\n\n We strongly advise furthering your bookkeeping knowledge and skills to ensure your processes are accurate and compliant.<\/p>\n\n\n\n Consider taking small business bookkeeping classes. Search through an online course provider like Udemy, or ask your local business advisor for recommendations.<\/p>\n\n\n\n If you want to reduce the responsibility on your shoulders, consider outsourcing to an online bookkeeping service.<\/p>\n\n\n\n These services are typically backed by a team of accountants that utilize online bookkeeping software, with services varying depending on what you need.<\/p>\n\n\n\n Online bookkeeping service providers typically offer different plans that may be billed monthly or annually.<\/p>\n\n\n\n Let\u2019s take Bench as an example.<\/p>\n\n\n At the time of writing, Bench <\/a>offers two main plans. Their first is a standard plan that provides monthly bookkeeping with year-end tax ready financial statements.<\/p>\n\n\n\n The second is a premium plan with the addition of tax advisory services, one-on-one tax strategy planning, and annual tax filing.<\/p>\n\n\n\n And since every business is unique, customized services are also available.<\/p>\n\n\n\n The clear benefit in using an online service is expertise.<\/p>\n\n\n\n Your books will be taken care of by a team of professionals, who are also available to offer help and support should you need it. This gives you complete peace of mind.<\/p>\n\n\n\n It also frees up your time, allowing you to focus more on your business and less on worrying about taxes.<\/p>\n\n\n\n Of course, you will need to pay for these services. But that is often offset by the time you will save (along with any potential mistakes you might make).<\/p>\n\n\n\n Most online services communicate through phone, chat or email, which means you won\u2019t need to book out a meeting room or travel to an accountant\u2019s office.<\/p>\n\n\n\n That being said, using an online service does mean that there is often a physical distance between you and the bookkeeper. When interpreting numbers or working out discrepancies, sometimes it helps to have an in-person meeting.<\/p>\n\n\n\n The final option is to hire a bookkeeper or an accountant to work in your business.<\/p>\n\n\n\n Bookkeepers can be hired full-time, part-time or even on a freelance basis, which can help reduce costs.<\/p>\n\n\n The big benefit of an in-house bookkeeper is that they get to know your business, inside out, which provides valuable insights into your business finances.<\/p>\n\n\n\n It also helps them to identify opportunities for cost saving, tax deductions, and financial planning strategies.<\/p>\n\n\n\n A customized service takes the burden off your shoulders, and provides a specific person for go-to advice, anytime you have questions or concerns.<\/p>\n\n\n\n Crucially, trained specialists will ensure your business remains compliant, and can perform accounting services without flouting tax laws.<\/p>\n\n\n\n The obvious downside is cost, as hiring your own professional will take up a much larger share of your budget than using a standard online bookkeeping plan or off-the-shelf software.<\/p>\n\n\n\n However, if your business is large enough, it certainly pays to have a dedicated professional within your team, especially if they can help navigate complicated situations and maximize your tax return.<\/p>\n\n\n\n Search for local, qualified accountants via the IRS website<\/a>. Or, simply start by searching online for \u2018small business bookkeeping near me\u2019.<\/p>\n\n\n\n At Alliance Virtual Offices<\/a>, it\u2019s our mission to help small businesses operate more flexibly, save money, and achieve growth.<\/p>\n\n\n\n We do that in a variety of ways, one of which is to recommend small business service providers on our Marketplace<\/a>.<\/p>\n\n\n\n Here you\u2019ll find a number of hand-selected partner companies, who take care of various small business needs — including small business bookkeeping.<\/p>\n\n\n\n Head over to Alliance marketplace<\/a> to learn more.<\/p>\n\n\n\n We can help you achieve sustainable, cost-effective growth in other ways, too.<\/strong><\/p>\n\n\n\n Here\u2019s how:<\/p>\n\n\n\n Virtual Office<\/strong><\/a><\/p>\n\n\n\n Create an instant presence with a commercially recognized address. Every virtual office includes a business address, mail processing, and easy access to onsite meeting rooms. Use your address to register your business, open a bank account, apply for credit, and more.<\/p>\n\n\n\n Plans start from $49 per month<\/a><\/p>\n\n\n\n Virtual Phone<\/strong><\/a><\/p>\n\n\n\n Establish credibility with a dedicated business number. Choose a local area code or break free from geographic boundaries with a toll-free number. A powerful VoIP phone system keeps your business connected with unlimited extensions, user-friendly call menus, customized greetings, and more.<\/p>\n\n\n\n Only $30\/month<\/a><\/p>\n\n\n\n Live Receptionist<\/strong><\/a><\/p>\n\n\n\n Strengthen your call experience with the help of our friendly, professional receptionists. We screen and connect every call, Monday to Saturday, which means fewer distractions and more time to focus on your business. Includes a business number and a market-leading virtual phone system.<\/p>\n\n\n\n Plans start from $125\/month<\/a><\/p>\n\n\n\n Meeting Room and Office Rental<\/strong><\/a><\/p>\n\n\n\n Work productively with hourly or daily access to private meeting rooms and offices. Choose from thousands of meeting rooms and workspaces globally with flexible rates by the hour, half day and full day. Every workspace is prepared for your arrival, with friendly onsite staff to greet visitors and help to make your meeting run smoothly.<\/p>\n\n\n\n Starting at $10\/hour<\/a><\/p>\n\n\n\n Coworking<\/strong><\/a><\/p>\n\n\n\n Coworking provides a connected, wellness-focused workplace with an established community of professionals. Flexible monthly subscriptions provide everything you need to work productively, including high speed Wi-Fi, comfortable workstations, onsite meeting rooms and helpful staff.<\/p>\n\n\n\n Plans start from $55\/month<\/a><\/p>\n\n\n\n Bookkeeping is non-negotiable for any business.<\/p>\n\n\n\n Not only is it legally important, but it also provides you with valuable insights into your company\u2019s financial status.<\/p>\n\n\n\n Keeping a tight grip on finances is critical for growth and success. And while it\u2019s tempting to try to control every part of your business — including your books — often, it pays to bring in a little help.<\/p>\n\n\n\n There are many different ways to handle bookkeeping, and as a business owner you should weigh the pros and cons to find the right solution for you, and your business.<\/p>\n\n\n\n For more tips and guidance on small business bookkeeping, take a look at our list of resources below.<\/p>\n\n\n\n Further Reading and Resources<\/strong><\/p>\n\n\n\n Whether you\u2019re looking for small business bookkeeping for dummies, or a guide pertaining to the finer points of accumulated depreciation, these resources will help signpost the way:<\/p>\n\n\n\n
\n\n\n![\"\"](\"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-content\/uploads\/2021\/09\/2-What-is-bookkeeping.png\")
<\/a><\/figure>\n<\/div>\n\n\nWhat is Bookkeeping?<\/h2>\n\n\n\n
![\"Here\u2019s](\"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-content\/uploads\/2021\/09\/04-Infographic-main-small-business-bookkeeping-tasks.jpg\")
<\/a><\/figure>\n<\/div>\n\n\n\n
What\u2019s the Difference Between Bookkeeping and Accounting?<\/h2>\n\n\n
![\"\"](\"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-content\/uploads\/2021\/09\/6-Difference.png\")
<\/a><\/figure>\n<\/div>\n\n\n![\"Here](\"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-content\/uploads\/2021\/09\/06-Infographic-key-roles-of-a-business-accountat.jpg\")
<\/a><\/figure>\n<\/div>\n\n\n\n
![\"\"](\"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-content\/uploads\/2021\/09\/02-Statistics-hald-accountants-CPA.jpg\")
<\/a><\/figure>\n<\/div>\n\n\n![\"\"](\"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-content\/uploads\/2021\/09\/7-Two-types-bookkeeping.png\")
<\/a><\/figure>\n<\/div>\n\n\nWhat are the Two Types of Bookkeeping?<\/h2>\n\n\n\n
Double-entry booking <\/strong>is a more common method for businesses, even small businesses. It requires two entries to be made for each transaction — a debit entry in one account and a credit entry in another.<\/p>\n\n\n\n
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<\/a><\/figure>\n<\/div>\n\n\nWhy is Bookkeeping Important for Small Businesses?<\/h2>\n\n\n\n
![\"\"](\"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-content\/uploads\/2021\/09\/8-Business-and-personal-finances.png\")
<\/a><\/figure>\n<\/div>\n\n\n![\"\"](\"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-content\/uploads\/2021\/09\/9-Tax-processes.png\")
<\/a><\/figure>\n<\/div>\n\n\n![\"\"](\"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-content\/uploads\/2021\/09\/10-Accurate-records-credit.png\")
<\/a><\/figure>\n<\/div>\n\n\n![\"\"](\"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-content\/uploads\/2021\/09\/11-Free-up-time.png\")
<\/a><\/figure>\n<\/div>\n\n\n
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<\/a><\/figure>\n<\/div>\n\n\nHow Can Small Businesses Make Bookkeeping Easier and More Effective?<\/h2>\n\n\n\n
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![\"\"](\"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-content\/uploads\/2021\/09\/03-Satistics-accountants-handle-small-businesses.jpg\")
<\/a><\/figure>\n<\/div>\n\n\nDo it yourself bookkeeping<\/h2>\n\n\n\n
![\"\"](\"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-content\/uploads\/2021\/09\/12-DIY-bookkeeping.png\")
<\/a><\/figure>\n<\/div>\n\n\n![\"If](\"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-content\/uploads\/2021\/09\/05-Infographic-if-you-are-intent-on-managing-your-own-small-business-books.jpg\")
<\/a><\/figure>\n<\/div>\n\n\n\n
Online bookkeeping services<\/h2>\n\n\n\n
![\"\"](\"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-content\/uploads\/2021\/09\/13-Online-bookkeeping.png\")
<\/a><\/figure>\n<\/div>\n\n\nWork with a bookkeeping or accounting professional<\/h2>\n\n\n\n
![\"\"](\"https:\/\/www.alliancevirtualoffices.com\/virtual-office-blog\/wp-content\/uploads\/2021\/09\/14-Bookkeeping-professional.png\")
<\/a><\/figure>\n<\/div>\n\n\n
\n\n\n\nHow to Find Bookkeeping Help<\/h2>\n\n\n\n
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<\/a><\/figure>\n<\/div>\n\n\nConclusion<\/h2>\n\n\n\n
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