What you need to know before you start your own bookkeeping
(disclaimer: this is not legal advice consult with a licensed professional)
Nearly 21% of small to medium-sized businesses fess up to not knowing the proper information about bookkeeping. Are you a part of that statistic? Whether you have been running your business for some time or are just starting out, you may have found yourself wondering “is bookkeeping hard?”
Bookkeeping is hard for many small business owners, which is why they seek the help of a qualified bookkeeping expert, like SynkBooks. Not only can you take advantage of business growth and real-time access to reports with a bookkeeper, but you can also ensure everything is accurate and accounted for.
Let’s take a closer look at what bookkeeping is, the best resources to learn bookkeeping, and other tips that’ll keep your business’s finances running smoothly!
What is Bookkeeping?
Bookkeeping is the process of recording all the transactions your business incurs, from receiving a check to paying a supplier. These transactions make up your financial statements that will be issued to lenders and investors and used to prepare your annual tax returns.
Monthly reconciliations of all cash and credit card accounts, report creation, payroll processing, invoice payments, and customer collections all fall under the roles of a bookkeeper. Business owners are often too busy to dedicate the necessary time to complete these tasks.
Accuracy is a must when it comes to bookkeeping. Inaccurate reporting leads to trouble with the IRS and other agencies along with missed opportunities for business growth. Most business owners with no formal bookkeeping training would respond yes to the question, “is bookkeeping hard?”
Is Bookkeeping Hard to Learn?
Yes and no. Certain bookkeeping tasks will be easy to complete while others may require extensive accounting and bookkeeping experience. Understanding the different factors that are involved in bookkeeping can help you decide if you should be completing your own bookkeeping or enlisting the help of an expert.
The industry you operate in impacts the processes and procedures you may be required to follow. Contractors will have different bookkeeping tasks compared to an online freelance business. This is why the question, “is bookkeeping hard,” is not as easy to answer as you may think.
Some industries have governing bodies that implement a specific set of rules that businesses should be following. Although these rules aren’t the law, noncompliance can result in lost funding and access to fewer investors.
For example, certain contractors are required to submit financial statements showing a target asset level in order to be accepted into a society. Additionally, poor bookkeeping controls can lead to missed opportunities and stagnant business growth.
The size of your business is also a contributing factor to the difficulty of bookkeeping. Small businesses may be able to record all transactions once a month and get by, but this can quickly change as your business begins to grow.
Growth goes hand in hand with a higher volume of transactions, turning that once-a-month recording process into a weekly ordeal. If you are planning for a high level of growth, it may be beneficial to bring on a qualified bookkeeper, like Synkbooks, now.
Method of Accounting
There are two main types of accounting methods: accrual and cash. The accrual method records income and expenses when it is earned while a cash basis method only records income and expenses when cash is received or paid. Recording transactions under each method significantly differ, making it important to understand the proper bookkeeping procedures.
Some businesses, such as those in the manufacturing industry, are required to adopt an accrual basis of accounting. Adopting the accrual method subjects you to complex accounting procedures, such as revenue recognition, accruing expenses, and accounting for prepaid expenses.
New guidelines can make bookkeeping hard as a business owner, which is why outsourcing your bookkeeping can prove beneficial. If you aren’t interested in outsourcing, be sure you read up on changes frequently.
How much time do you have to dedicate to bookkeeping each week? If you answered little to none, bookkeeping will be hard to keep up with, as bookkeeping procedures should be completed on a regular basis.
Neglecting your bookkeeping function for an extended period of time opens the door to costly mistakes on your financial statements and tax return. Forgetting to record an expense altogether can result in a higher taxable income. No business owner wants to overpay on taxes.
Laws and Regulations
The laws and regulations your business is subject to will impact the question, “how hard is bookkeeping?” The government is concerned with payroll, sales, and income taxes in your small business, making full compliance a necessity.
Payroll taxes need to be remitted on a pre-determined schedule by the IRS, meaning you could be on the hook for weekly or bi-weekly remittances. Sales tax returns need to be meticulously tracked for exempt and non-exempt sales. Misclassification leads to overpaying or underpaying on your tax liability.
Confusion in your bookkeeping function results in missing important deadlines, which the IRS and state agencies don’t take lightly. Your business will be assessed fines, penalties, and interest for each late submission.
Communication between different departments is necessary to complete the bookkeeping in your business. Conversing with suppliers on invoices and customers on accounts receivable is a regular duty.
Proper bookkeeping requires you to engage with employees to record transactions on company credit cards and track reimbursed expenses. Business owners often don’t have the time to be on the phone all day communicating with different people, leading to missed revenue and late payments.
How Can I Learn Bookkeeping?
Small business bookkeeping can be learned, but keep in mind that learning all the required information takes experts months and even years. Following these tips can help you learn bookkeeping, but don’t be afraid to reach out to an experienced bookkeeper for assistance.
Sign up for Courses
There are a plethora of courses available for you to take to learn the basics of bookkeeping, many of which come at little to no charge. Browse the courses offered at your local college and sign up for one that fits your needs.
Moreover, a quick online search can bring up various online courses for you to take, some of which are tailored to the software program you will be using. A basic bookkeeping course can cover what you need to know to get started.
Don’t forget to save the receipt for your course. Continuing education courses related to your business are a qualifying business expense for financial and tax purposes, ultimately lowering your taxable income while giving you the required bookkeeping knowledge.
Invest in a Software
Automation of bookkeeping controls takes a portion of the recording burden off your plate. Most software programs come with the ability to seamlessly integrate transactions from your bank account. Although you will have to review the transactions, integration can reduce errors and help you learn the process.
Furthermore, accounting software programs come with resources that guide you through the bookkeeping process, aiding in your learning. Once you find a software you like, look into the different resources available.
Consult with an Expert
When all else fails, reach out to an expert. Expert bookkeepers adjust their level of service to fit your needs, serving as your go-to when questions arise. Have a qualified bookkeeper review your bookkeeping for the first few months to ensure everything is recorded properly and to catch any mistakes.
Generate a Monthly Checklist
As you begin working through the bookkeeping process, keep track of the procedures you complete and create a checklist. Creating a bookkeeping checklist will help ensure you are completing the necessary procedures each month.
Your list should be broken down into daily, monthly, quarterly, and yearly tasks. Your daily tasks might include recording income and expenses, sending invoices, and making bank deposits. Monthly tasks should include reviewing reports and following up on past dues. The specifics of your list will be based on your business needs.
Is Computerized Bookkeeping Hard?
Computerized bookkeeping is rapidly changing the way small businesses go about bookkeeping. Instead of recording everything on paper or through a checkbook, businesses are now utilizing the cloud to record and store data.
Cloud-based bookkeeping gives businesses added security, data prevention controls, and access to improved processing speeds. Nevertheless, you will still need to have a basic understanding of bookkeeping procedures to effectively implement computerized bookkeeping.
I Don’t Want to Do Bookkeeping, Now What?
After reading through all the different factors of bookkeeping, does it seem like something you can handle? If so, great! If not, there are still ways to take advantage of the benefits of bookkeeping without putting in the time and effort to learn.
Outsourcing the bookkeeping function is becoming more popular as business owners are struggling to find the necessary time and energy to maintain accurate books. SynkBooks understands that bookkeeping can be tricky, which is why their team of experts work diligently to take this burden off your plate.
When the time comes and you ask yourself “is bookkeeping a hard job,” keep these factors in mind. Reach out to a team member at SynkBooks today for more information!