Business Expenses Tracking and Record Keeping: Bookkeepers are necessary for businesses, even though many do not deem them necessary. First, let’s establish the difference between a bookkeeper and an accountant.
Bookkeepers- Bookkeepers record the business transactions, including inflow and outflow for daily activities. A bookkeeper categorizes and reconciles your bank statement transactions.
Accountants- An accountant analyzes your business’ financial health and plans business growth strategies.
Ideally, bookkeeping should be done each month. It is important to consider the level of financial knowledge and the time that doing your books requires. If you decide to do it yourself, inform and educate yourself and acquire the appropriate software or use a robust Excel spreadsheet that can help you accomplish the task more easily.
Outsourcing a Bookkeeper: If your goal is to maintain focus on other important parts of your business, hire a part-time or full-time bookkeeper. Arias Leonor Accounting Services is here to assist you in completing this vital business task.
Accounting Recording Method: Whether you decide to go with a bookkeeper, accountant, both, or do it on your own, you need to decide which recording method you will use for business. The method will depend on the nature of your business.
The Cash Method: We like to call it “the Present Method” (money in and/or money out method). Receivables (Revenues) are recognized as soon as they come in; the same is done for the expenses (payables). This method is an easy way to account for the inflow, outflow, and balance. It is a common method within the small business community. However, it does not necessarily apply to all small businesses.
The Accrual Method: The accrual method is recognized when the transaction takes place, not when the money is on hand. This method requires detailed and careful monitoring to avoid serious consequences as it could reflect a healthy financial status on the company’s books, with no money collected yet altering the accuracy of cash flow. One of the positive aspects of this method is that it allows the business owner to accurately depict income and expenses over time.
Note: Accrual Method is required for companies that have annual revenue of more than $5 million.