7 Steps of Doing Your Own Bookkeeping

If you follow these steps you can doing your own bookkeeping for your business these steps are as 

follow:

1.      To Make Sure that Your Business Transactions are not Intertwined:

Now the first step to doing your own bookkeeping is separating your business and personal expenses you'll want to make sure that your business and personal transactions are not intertwined so it's clear to the IRS what your business is earning spending and then what your bottom line net profit is this is especially important for C corporations to have separate bank accounts for business and personal finances see Corpse open themselves up to legal problems.

When their finances aren't separate from personal transactions the second step is to choose between single entry or double entry accounting double entry is a system of accounting that tracks where your money comes from and where it's going to essentially you record every transaction twice taking assets from somewhere called a credit and putting it somewhere else called a debit. your debits and credits should always equal each other that's how you know that your books are balanced.

For example, say you buy a new mobile for your business and it costs $1000 you'd subtract $1000 in cash from your credit account and add$1,000 in assets to your debit account you may have lost $1,000 in cash but you gained $1000 in the form of a new asset.

2.       Double Entry System:

Double entry accounting is kind of like double checking your homework and helps you create financial statements. Which you'll need to make smart financial decisions so what is a single entry method it's essentially just recording your transactions once as they happen it's less robust but if your business is a simple sole proprietorship with no inventory and no employees you can probably use the single entry method if your business is any more complex than that your accountant will probably recommend the double entry method.

3.       Accrual Method of Accounting:

 Choosing between the cash versus accrual method of accounting on a cash basis you only recognize revenue when you receive it, for example when you deposit the check into your account on an accrual basis you recognize revenue. when it's earned for example once you complete a project and write the invoice. If you're a small business or just getting started you can probably use the cash method, it's easy to switch from cash to accrual if you need to if your business is more complex for example if your business more than five million per year in revenue or if you manage large assets or investments you'll probably need to use the accrual method either way you should talk to your accountant to figure out which method will be best for your business.

4.       Choose your Bookkeeping System:

Bookkeeping system your options are to do it manually using something like Excel or just paper or use an accounting software if you do it in Excel you can use something like our free income statement template for a simple bookkeeping setup all you have to do Is enter each transaction as it happens if your bookkeeping means are straight forward this is the easiest cheapest way to go you can download this excel template by clicking the link in the description below if you choose to use accounting software there are a few options for small businesses such as Quick Books Xerox or wait you'll pay a monthly fee for the software which you can use to produce simple financial reports keep in mind though you may need to have an accountants help to learn how to properly use the software.

5.       Categorize Your Transactions:

Categories are essentially classifications for your transactions to understand what you're spending on these types of categories can help you understand what your tax deductions are not all transactions are equally tax deductible so you'll want to know what you're spending on office supplies versus what you're spending on meals for example if you buy a box and pens for the office you'll categorize it as office supplies at the end of the year you'll be able to see the total amount you spent on office supplies and you'll be able to deduct that cost on your taxes.

6.       Organized your Documents:

organize and store your documents you need to keep records for your bookkeeping but there's a bit more to it than just storing all of your receipts in a shoebox there are two important rules for your record-keeping rule one if the expense is over $75 you should keep a record to prove the expense rule two you should keep every receipt and financial record for three years as for actually keeping the records we recommend storing them digitally the IRS is totally fine with that and it's an easy away for you won't need the receipts to actually file your taxes but you will need them if you get audited some tools you can use to keep your records digitally include receipt banks Ever note and shoebox finally.

7.       Make Habit:

The last step is to make it a habit what keeping isn't the most exciting thing but if you do it consistently you'll have smart financial insight into your business every month of the year and you'll save yourself a lot of time and headaches come tax season at minimum. We recommend entering in all your transactions at least once a month block out a recurring time in your calendar and do it somewhere fun like a coffee shop or do something relaxing like putting on Netflix while you do the work the more automatic.

 your bookkeeping habit the easier your tax season will be nobody likes a stressful bookkeeping binge now should you do your own bookkeeping or hire someone else to do it for you doing your own books is free that's the biggest draw but it can be complicated time-consuming and can take you away from running your business if you're interested in doing your own bookkeeping click the link in the description for a free income statement template created by our expert in-house bookkeepers here at bench if you decide to hire someone to do your bookkeeping it helps save you time gives you confidence your books are being done properly and makes tax time a whole lot easier if you aren't sure who to hire check out bench or the largest bookkeeping service in north America and we'd love to do your books for you and that's it from us here at bench good luck on your entrepreneurial journey and happy bookkeeping.