Super pumped up about bookkeeping now and looking for something to get started on right away? Your cash flow statement helps you understand how money moves into and out of your business. The assets section of your balance sheet tells you how much value your business has, while the liabilities section tells you how much money you owe. You’ll analyze your financial documents to get key insights into your business’s health, which will help you make smart business decisions going forward. Your cash flow statement shows how money moved into and out of your business in a given period. It lets you know if your business is making money at a healthy pace, or if you might be struggling to stay afloat soon.

There is some overlap in the following skills on the list, however I decided to leave them the way they are with intention. Assuming Riverside paid $100 in overhead, you can subtract revenue and material, labor, and overhead costs to calculate their profit from the Joneses’ project. Laura is a freelance writer specializing in small business, ecommerce and lifestyle content.

How a Bookkeeper Is Different Than an Accountant

You may think that combining your personal and business expenses is a good idea. However, merging your business and personal bank accounts is most likely going to cause you headaches sooner rather than later. Managing transactions is a big part of any daily bookkeeping routine.

Read on to learn how to hire a bookkeeper, tips and questions to ask, and the benefits of handing over the work to the pros. If your bookkeeper bills your customers or pays your vendors and employees, make sure you have proper checks and balances in place to mitigate the possibility of fraud. You can also use financial ratios here to dive deeper into your profit and loss statement.

Best Bookkeeping Tips for Small Businesses

While they seem similar at first glance, bookkeeping and accounting are two very different mediums. Bookkeeping serves as more of a preliminary function through the straightforward recording and organizing of financial information. Accounting takes that information and expands on it through analyzing and interpreting the data. Often, the balance sheet is overlooked and is actually one of the most important if not the most important – financial statements. Now that you’ve reconciled – or balanced – your books, you need to take a closer look to holistically understand your company’s financial health. This will give you an accurate bird’s eye view of what checks are still outstanding, post any bank transactions, and add additional charges, such as account fees.

• Imagine your small business is a ship sailing through the ocean of the market.
• As we’ve previously discussed, deciding whether to hire a bookkeeper or do it yourself is much like deciding whether to change your own oil or hire a mechanic.
• When an effective bookkeeping system is in place, businesses have the knowledge and information that allows them to make the best financial decisions.
• A disadvantage is that you may not always know what funds you have on hand, and you might not have the necessary funds if you have many outstanding invoices.
• If you’re running a small business, you’ve got to make it habitual.

Remember, the goal is to focus on growing your business and selling your products or services. Sometimes, getting help from partners who compensate us can be smart. Another mistake is not using double-entry accounting, where every transaction is recorded twice to ensure accuracy. Missing receipts or How to Meet Your Bookkeeping Needs not reconciling accounts regularly can also lead to problems. It’s essential to watch for these errors to maintain an accurate picture of the business’s finances. Finally, if you want someone else to do your bookkeeping for you, you could sign up for a cloud-based bookkeeping service like Bench.