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How to start the bookkeeping process?

How to start the bookkeeping process?

When you start a business .one of the most important steps you take while running it is bookkeeping which is the daily recording of all financial transactions that take place. If done properly, companies are able to keep a track of all the information that helps in making important investment and financial decisions. It is not only the company that reaps the benefits of good bookkeeping but external entities such as investors and even the government use it to make investment decisions. Simply put, the entire economy relies on it for strategic decisions. Companies can also use it as a basis for judging if they have reached their income goals.  Large companies choose to hire efirm to provide bookkeeping services Melbourne CBD and all over Australia to help save time and focus on their core business. Small companies may also hire their services part-time to keep within budget but also gain the advantages.  Bookkeeping also involves the maintenance of general ledgers which can be created on a computer spreadsheet for recording the sales and expenses. Payrolls can also be completed and debit and credits can also be calculated with ease if the process if properly done. The primary role of a bookkeeper or hired bookkeeping services in Melbourne CBD is to ensure that the transactions are recorded on time and with extreme accuracy so that no mistakes are made in the accounts. 

Bookkeeping can either be manual or computerized. The traditional manual way entails that the transactions are recorded by hand on paper ledgers or journals. Small businesses usually use this method as it is cheaper and easier to maintain but can be a rather lengthy process. The computerized method is relatively new and uses accounting software to make record; it is a faster and more convenient way of doing things and results in fewer errors. It eliminates the tedious task of writing everything down by hand. Training also has to be provided to the employees on how to use this system. Further, there are two types of bookkeeping systems: double entry and single entry. Single entry is used by small companies who have few transactions. Entries are recorded one time as a sale or expense. The rest of the records such as equipment and assets are recorded separately in the form of notes.  This system can be prone to error as it lacks detail which can fail to provide a comprehensive view of your accounts in most cases.  Most business use the double entry system as it is more detailed and error-free. It uses the concept of debit and credit and each transaction affects both accounts.  It gives a more accurate view of the business and analysis can be made on its performance. Double entry can be complicated but with you can hire bookkeeping services in Melbourne CBD to help you. 

There are certain steps involved in the process: 

  1. Separate your personal and business accounts to prevent you from being personally liable for any debts incurred. 
  2. Choose between a single entry or double entry system.
  3. Choose between cash or accrual accounting. Cash accounting is where records are made only when money has been exchanged. With accrual accounting, you’ll be able to record transactions even if you haven’t been paid.  
  4. Transactions should be categorised into generally these accounts: assets, liabilities, equity, revenue and expenses.
  5. Documents such as receipts should be organised and then stored.
  6. Think of any potential deductions that could be made. 
  7. Remember to stay on track with your bookkeeping and get it done on time. 

Bookkeeping helps in managing your clients and suppliers. You are able to account for every dollar that you have spent and can effectively manage your cash. You can make wiser business decisions as investments with good returns can be easily identified problems can be avoided. These records are also useful in acquiring loan as banks and lenders are able to make quicker decisions with the accurate information. You are able to effectively pay your taxes which helps you comply with tax laws. You can also detect any fraud or embezzlement that may be taking place in your company. Honest bookkeepers can easily spot any suspicious activity in your accounts offer records as proof to get to your perpetrator. 

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