A business without any form of accounting process is biting dust. Bookkeeping is a part of accounting and it is considered as a major step towards stability for any business. This is the process wherein you, as the business owner, record financial transactions in order to maintain a stable cash flow. If you are an entrepreneur who is just starting out in the business industry, here are some important bookkeeping elements that you have to perform:
Ledger creation
The first step is the acquisition of a financial ledger. This is helpful since you will be managing a business account, and keeping track of invoices without a ledger proves to be challenging. The style of your ledger depends on how large your start-up business is. For automation and accuracy, you can try out bookkeeping software that can be downloaded online. Paper ledgers can be used temporarily if you do not have an automated application yet.
Recordation
By recording your transactions in the ledger, you are not only ensuring the stability of your business, but you are also taking entrepreneurial responsibility. To validate invoices properly, you must list down the information of payees, modes and terms of payments, memorandum on banking check, and payment categories for tax purposes. As your business grows, recordation will become more extensive and you may need to hire a business accountant.
Schedule payments
By creating a schedule for all of your future payments, the financial standing of your business will become more stable. You will have an idea regarding expenditures and you can prepare for these before the due date arrives. Scheduled payments are also known as Accounts Payable or AP. Commonly, AP is listed in two factors: the actual due date and the deadline before financial penalties are incurred. With online bookkeeping services, that can help you set up your AP system with just a few clicks.
Another type of scheduled payment is Accounts Receivable or AR. This is the part where your business anticipates incoming receipts from clients. Your automated ledger can help you create invoices for clients. Remember that AR payments must not roll over to actual payments in the ledger. If the set-up for the AR system is not efficient, you risk having bouncing checks in your account.
Bank statement reconciliation
This is one of the most important steps of business bookkeeping. If your bank account is reconciled with your financial ledger, you will be able to see inaccuracies and discrepancies. This will prevent upcoming financial disasters that may ravage your business. Bank reconciliation is also a requirement for growing businesses. Accounting application is more efficient in reconciliation compared to paper ledgers because the process is automated. In one set-up, the application can download your bank records and you can mark which payments and deposits have already been recorded. You can choose to reconcile accounts in a monthly, weekly, or even daily basis.
Learning bookkeeping may be challenging at first, but it will become easier through continuous practice. To obtain more accounting skills and knowledge, you can invest in accounting seminars for businessmen within your locale.
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