If you’re going to play the game of business you must learn to speak the language of business. Unless you’re an MBA accounting usually doesn’t sound like fun but it’s not scary.
Accounting and Bookkeeping – A Crash Course
Okay, here it is, as painless as possible. Accounting and Bookkeeping are different.
- Accounting is what accountants or CPAs (certified public accountants) do to prepare your taxes.
- Bookkeeping is what bookkeepers or business owners do to keep your business running smoothly.
Bookkeeping is made up of two things:
- Payables: paying bills, paying your employees, contractors, and yourself.
- Receivables: sending invoices, sending proposals, getting paid, and making sure your invoices get paid.
That’s basically bookkeeping. You can add to it things like categorizing income and/or expenses to see how you’re spending money and how you’re making money.
Here Are The Things Your CPA Will Want To Know:
- How much money did you bring in this year? (Gross Revenue)
- How much money did you spend on wages for employees and contractors?
- How much money did you spend on everything else?
- Did you take investments or loans?
- Did you make any investments in things like machinery, computers, office equipment or property?
Here are a few things you need to consider when setting up your bookkeeping system:
- You need a system for billing people. Web-based systems are the best. Imagine losing all of his 2017 data due to a hard drive crash, and no, you didn’t do backups. It could cost hundreds to thousands of dollars to recover your accounting data.
- Too busy to send invoices and categorize expenses, hire a bookkeeper. Otherwise you will be working for free and run out of cash very quickly.
- You need to know who owes you money. You need to know who is past-due and who is paid up. Some of these invoicing applications allow for due date tracking. Do not use a calendar app like Google Calendar or iCal to do that for you, because in doing so, you will forget things.
- Track your expenses with a fine-tooth comb. Tracking business expenses will save you thousands of dollars at the end of the year. Save every gas and food receipt, track your mileage on your car, remember parking fees, log computer expenses, watch phone lines, Internet connections, and anything else related to your business. Be aware of the commonly-missed business expenses and what you need to record in addition to receipts (Did you know that “costs of goods sold” are tax deductible?). There are several ways to track expenses. Using a shoebox for handling expenses is asking for trouble. There are many expense- tracking services online. You can also use a Google spreadsheet and enter them by hand.
- Don’t use your personal bank accounts to make purchases for your business. Have at least one business bank account, and use it exclusively
Don’t allow bookkeeping to take over your life. Bookkeeping won’t make you money. If you find yourself too busy to handle it, consider outsourcing your bookkeeping services. Do what makes you money. You are not a bookkeeper, so don’t try to be.