When you start a small business, accurate accounting and bookkeeping ensures a successful path for your business. Organized financial records are necessary for every small business and a bookkeeper can ensure the transactions of the business are properly recorded. Here is what a bookkeeper can do for a small business. Read below.
1. Build and Manage Accounts
Bookkeeping is the process of recording day-to-day transactions of the business in the company books. A bookkeeper is required to evaluate the expenses and income incurred and earned by the business and classify the transactions in the correct accounts. There are five major types of accounts:
- Assets
- Liabilities
- Revenue or income
- Expenditure or expenses
- Equity
The accounts mentioned above individually represent the cash and other assets owned by the business, the liabilities payable, the inflow and outflow of cash, and the profitability of the business. Accurately recording the business transaction in the correct accounts makes business operations smother. The bookkeeper can aid in selecting the appropriate bookkeeping software the business should use.
2. Note Financial Transactions
A financial transaction takes place when an agreement or communication ensues between two parties in an exchange for an asset, services or a supply and the corresponding payment. These transactions occur every day for both large and small businesses. The basic of recording any transaction is recorded using the double-entry accounting system, which dictates that every account requires an equal and opposite entry in another account. Until both side of the entries match, the bookkeeper won’t be able to close the books. It is also important that a bookkeeper records the transactions in the appropriate account to ensure the books correctly reflect the Financial position of the business.
3. Close the Books
This is an important step. It provides a complete closure of the transactions that have taken place during the month and gives a clear picture of the financial position of the business. The bank accounts should be reconciled and ay adjusting entries incorporated. For simplicity, the equation of Assets = Liabilities + Equity will be the result of balancing the books. Closing and reconciling the accounts accurately requires a professional bookkeeper to handle these processes.
4. Draft Financial Statements
Financial statements give a summary of the business’ financial health. They give more insight into the decisions the business should make in the future. It is a formal record of the position of the business and its financial activities, submitted in a structured manner for ease of understanding the financial information. Some common financial statements among the many include Cash Flow Statement, Balance Sheet and Profit and Loss (P&L) Statement. Professional bookkeepers provide bookkeeping services for efficient data entry and creation of statements through their expertise and accounting software.
Chartered Professional Accountants support a business by providing professional accounting and bookkeeping services. Contact MMT Chartered Professional Accountants for bookkeeping and other specialized accounting services to help your business grow.
