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What is Bookkeeping?

basics bookkeeping Oct 30, 2020

“So what is bookkeeping?”

Believe it or not that’s actually one of the most frequently asked questions we get. Small business owners seem to understand that it has to do with basic business finances, but what is bookkeeping really?!

 

Bookkeeping Basics

 

“Bookkeeping” is the act of recording financial transactions. Seems simple, right?

 

Well, wait a second, while we’re here… let’s break down the word “transactions” too, so we have the most basic building blocks of bookkeeping!

 

What is a Financial Transaction?

 

There are two general types of transactions you need to record for your bookkeeping, your expenses and your income. At the most basic level, you are recording the money that goes out of your business (an expense) and the money that comes into your business (your income).

 

Expense Basics

 

We need to record the money that goes out of our businesses so we can know what our...

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How Bookkeeping Makes Your Small Business More Profitable: Resources

 



Wow, we covered a lot of information in the last month. And for all that we did cover, there’s so much more information that we could have given you… but it would have been difficult to understand it all at once

 

Profitability, in theory, is simple, but in practice, it takes time to understand and even more time (and plenty of energy) to apply your knowledge to your small business.

 

Let it never be said that we left you high and dry! We’ve got some wonderful resources that we use ourselves and also use with our relatively diverse set of small business clients.

 

Profitability Review

 

As we know by now, profitability isn’t just in the numbers, profitability is much more of a measure of your efficiency and ability to grow. More specifically, profitability is a measurement of how much profit you can make with a given set of resources and inputs.

We know that having a firm grasp on your expenses is the first step to...

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How Bookkeeping Makes Your Small Business More Profitable: Profits and Long Term Planning

So you’re making money and you’re happy… but what do you do next? Let’s discuss how you can use your net income to further your own profitability and lay the groundwork for long-term success!



Managing Profits and Savings

 

If you made it this far with no debt, you should not only pat yourself on the back, maybe you could tell us your secret - but for most small businesses, the first few years are more about staying afloat and learning the ins and outs of your new dream job. 

 

Most of us have borrowed in some form or another to make sure we had the cash flow to maintain our business during its infancy. Now that we have secured net income and we understand how to make our services profitable - we can focus on managing our money efficiently! 

 

If coming up with a Debt Reduction plan wasn’t part of your process for understanding your business expenses, than now is the time to do it! Pay from the highest interest rates first -...

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How Bookkeeping Makes Your Small Business More Profitable: Knowing your Customers and Increasing your Profitability

If you’ve been keeping up with our recent blogs you’ve already learned the foundation of small business profitability - your expenses and your income. Now it’s time to expand on this foundation to create sustainable changes in your business that lead to long term success.

 

It may seem like the above covers almost everything about making your small business more profitable, and we did cover a lot of very important things that will make you a smarter business owner, but there’s even more you can do to create an efficient and profitable business!

 

Knowing your Customers

 

Love, hate, or something in between, you need your customers for your small business to thrive!

 

When you’re just starting out, you’re thankful to have any clients, and you probably aren’t worried about retention or sales trends. But now, you’re smarter and you understand the money flowing in and out of your business - so it’s time to...

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How Bookkeeping Makes Your Small Business More Profitable: Knowing your Income

 

Last week we talked about how understanding your small business expenses is a crucial component in making your business more profitable. Now we’re going to build on that with what we all really think of when we think of profitability, income.



The Expense and Income Relationship

 

In its most simple form, your income is all the money you bring in and your expenses are all the money that goes out. Your profit, or lack of, is the difference between these two numbers.

 

One common phrase that we hear and say frequently is “if you want to make money, you have to spend money.”

 

That doesn’t mean you just need to spend a certain amount of money, you need to make good decisions about what you spend your money on so those expense result in income for your small business.

 

Evaluating your expenses on a regular basis is one of the best ways for small business owners to stay on top of their financial plans and, most importantly, meet...

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How Bookkeeping Makes Your Small Business More Profitable: Knowing your Expenses

Keeping your Small Business books in good order is something that we’ve hammered home to our readers over the last year - but there’s more to good business than just keeping your books up to date, in fact, that’s only the beginning! 

Good bookkeeping is the gateway to making your business go from good to amazing and it will allow you to turn small successes into huge gains.

So.... What is profitability?

Well it’s not just your top line that is important. That is to say, profitability is not measured only by your INCOME, it’s more than that.

Profit is an absolute number that is calculated by subtracting the total expenses from the total income.

So your profit margin is a solid number, while your profitability is a relative one. If this sounds more like math theory than business practice, don’t worry, stick with us and we'll explain...  

In the most simple sense, profitability is a metric that a company will use to determine how...

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Year End Tips and Tricks

 

Can you believe that 2018 is almost done??!

 

We certainly can’t! It doesn’t seem to matter how organized your are, when you have a lot of stuff to do, it’s almost like time passes faster. And since I’d get in trouble if this blog became a discussion about relativity, we’ll skip to the good part and cover 4 Tips and Tricks to help you make sure your books are where they need to be!



4 Ways to Ensure your Books are Ready for the New Year

 

If you’ve kept up with our blogs throughout 2018, you might be familiar with some of these tips, but that won’t make them any less useful.

 

Whether you’ve mostly kept up with your books for the year, or you’re staring down multiple months of transactions, read on for some ways to save your time and sanity!



1 The Chart of Accounts

 

Your Chart of Accounts, or CoA, is your friend! It contains all of the categories that you use to keep your bookkeeping records as well...

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How to Track your Business Mileage

apps bookkeeping Nov 01, 2018

 

 Mileage Matters

We’re going to cut to the chase here: mileage deductions are one of the most frequently missed deductions on business tax returns. It’s not a small deduction either, Intuit reports that mileage deductions average out to over $600 per self-employed subscriber.

 

That’s money you could be saving on taxes every single year. 

 

Mileage Tracking Apps

 

Quickbooks Online offers a plethora of apps you can use to make your experience better. Here we’ve got a list of the best software apps that you can use to track your business mileage!

 

Quickbooks Online Self Employed

 

If you are a sole proprietor and use a Schedule C for your small business, then you should consider using Quickbooks Self-Employed. It’s mobile phone app allows you to record your mileage and directly populate your tax forms through Intuit’s Turbotax software.

 

Mileage tracking doesn’t cost any extra on top of...

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The Simple Guide to Reconciling Your Bank Account

Why do we need to reconcile our bank & credit card accounts?

 

To keep it simple... Because we want to make sure the transactions reflected in your business records match the transactions recorded by your bank.

 

We use bank (and credit card) statements to double check that the accounts in our bookkeeping system, accurately reflect the transactions in the physical account they represent.

The use of systems like double-entry bookkeeping help ensure that you enter the correct numbers in the right places; bank reconciliations is the "bow" you tie on your account that lets you know that all of your transactions were recorded correctly, then they match the actual transactions and balances in your bank accounts to make sure you didn't make any mistakes.

Now you might be wondering, do ALL of my accounts need to be reconciled?  The simple answer is no.  But to help you know which accounts do need to reconciled, here's a quick refresher about how your accounts...

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How to Set Up A Bookkeeping System

Previously we covered the difference between Bookkeeping and Accounting and the definition of Bookkeeping, so now that you know what it is, we’ll show you how to use it!

 

If Bookkeeping is the act of recording financial transactions, then a bookkeeping system is a system designed to record and view these financial transactions!

 

Basic Small Business Bookkeeping Overview 

Let’s briefly recap some important ingredients in this financial pie!

There are several basic (but very important parts) of a bookkeeping system: the basis, the entry system, and the usage of bookkeeping or accounting tools.

 

Basis refers to which method you’ve chosen to record financial transactions.....  cash or accrual basis?

 

Entry System refers to single or double-entry bookkeeping. It is closely tied to your tool of choice, as well. We highly recommend that you use double entry for bookkeeping, it is more accurate and provides you with more data. To make...

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