Bookkeeping is essential for business growth. Bookkeeping is the practice of organizing and maintaining the financial records of a business. These financial records involve cash flow statements, monthly expenses, balance sheets, etc. Also, bookkeeping includes the management of the accurate amount of pay and receipts in books. It helps to manage the overall financial health of an organization. So, the companies can analyze their critical financial information at any time with proper bookkeeping. This will help new entrepreneurs to make important financial decisions. Here, we are going to simplify the basic ideas of bookkeeping. It also explores how it influences new entrepreneurs.
Outsourcing Bookkeeping
Outsourcing bookkeeping is a practice among new US entrepreneurs. Many business owners need help to handle it. They may need more time. However, bookkeeping is essential for the smooth growth of new entrepreneurs. Thus, it acts as a necessary part of the success. Outsourcing bookkeeping means hiring an individual to manage your books. It is better than having an in-house employee handle it. This approach can help new US entrepreneurs save on maintaining a full-time employee. It can help new entrepreneurs save time, money, and resources while significantly improving their financial management. It gives owners control over their finances.
The First Seven Steps of a Bookkeeping Process
There are some important steps in the bookkeeping process. This section will also explain the basics of bookkeeping. Here are the essential seven steps to get your bookkeeping process started.
1. Separation in business & personal expenditures
The primary part of grasping your finances is simple. You must get a bank account and separate your business and personal expenses. Liability is one reason. There must be more distance between your personal and business finances while you run a corporation or an LLC. Thus, you could be held personally liable for any debts your company has. Mixing personal and business expenditures in the same account takes a lot of work. It can even result in unnecessary stress. It will also need clarification when you need to file taxes. It could mean a business expense gets lost in your account. After all, you miss out on a critical deduction.
2. Bookkeeping system to be chosen
There are two main bookkeeping methods. They are single-entry and double-entry bookkeeping. Journal entries are recorded once as either expenses or income under single-entry. Here, assets and liabilities are tracked separately. Single-entry is probably right for you if you're starting out, doing your books independently. Double-entry is considered complex. But, it is more robust and suitable for established businesses. All transactions are entered into a journal under double-entry bookkeeping. After, each item is entered into the general ledger twice. Most accounting software is based on double-entry accounting. If you ever hire an accountant to help you with your books. There, they'll definitely use double-entry.
3. Choose the right tools.
Every transaction you make must be categorized when entered into your books. It helps your bookkeeper catch more deductions. It will make your life easier if you get audited. The way you specify transactions will depend on your business and industry. Your transactions fall into five account types. These involve assets, revenue equity, expenses, and liabilities. Individual line items are then broken down into subcategories that are considered accounts. These days, you have three options when it comes to bookkeeping tools. These tools can be powerful if you know what you're doing. However, if you have little bookkeeping experience (or don't have time to learn), they could stress you out and help you. It is especially true if your accountant tells you you've been using them incorrectly for the past year.
4. Make sure your transactions are specified
Every transaction you make needs to be specified and entered into your books. It helps your bookkeeper catch more deductions. It will make your life easier if you get audited. It's worth talking to a pro when you set up your system to ensure that the accounts you create align with your industry expectations. It may also align with CPA expectations.
5. Choose a system for document storing.
You are responsible for proving the validity of your expenses. You must keep supporting documents for your financial data. It includes receipts and records. Thus, choosing a system for storing your documents is essential.
6. Organize your deductions
If an expense is ordinary and necessary, you may still need help deducting it from your taxes. But you have to organize where to deduct or not.
7. Make bookkeeping a habit
New US entrepreneurs have a million things to do. Here, it's easy to let bookkeeping fall by the wayside. One way to evade that is to make it a habit. Thus, if you're months or years behind, you should get a bookkeeper to do catch-up bookkeeping.
Read Also:- How to Create a Bookkeeping System When Starting a New Business
Advantages of Bookkeeping for New US Entrepreneurs
There are many advantages of bookkeeping for new entrepreneurs. It involves:
1. Scalability
Outsourcing bookkeeping services can be scaled up or down based on needs. The level of service will quickly increase as the new entrepreneurs grow, allowing them to accommodate the increased workload without worrying about hiring and training additional staff.
2. Saving time
Another benefit is saving time. Time is valuable for new entrepreneurs. Thus, spending hours each week managing your books can distract you from more critical tasks. These tasks involve growing businesses or developing new products. It helps free up time to focus on these vital areas.
3. Valuable insights & analysis of their financial data
Additionally, outsourcing bookkeeping can give new entrepreneurs valuable insights into their financial data. Professional bookkeepers can help new entrepreneurs track key performance metrics. They can identify trends or patterns in economic data. Thus, they can make strategic decisions based on reliable information. Outsourcing bookkeeping allows new entrepreneurs to understand their commercial health better. It also makes more informed decisions to drive growth and success.
4. Comprehensive Financial Reports accessing
Another benefit of outsourcing bookkeeping is access without hiring a full-time accountant. The business owner can access detailed financial reports with just a single click, which offer insights into the various parts of the business. Thus, the owners can quickly review cash flow history, profit and loss statements, etc.
Bookkeepers' diligent record-keeping retrieves comprehensive information quickly and straightforwardly. This data can be effortlessly shared with partners and financial consultants.
5. Improved efficiency
Outsourcing bookkeeping helps new entrepreneurs gain modern technological benefits. It can help streamline their financial management tasks, reduce the risk of errors, and increase efficiency. After all, it provides greater transparency into the new entrepreneurs’ financial health.
6. Cost savings
Cost savings are a primary advantage of outsourcing bookkeeping. New entrepreneurs can hire an external bookkeeping service. They can evade the expense of a full-time employee. The fees will be associated with hiring and training a full-time bookkeeper. Outsourcing also avoids the need to purchase accounting software. This is because most service providers have their systems in place.
Outsourcing bookkeeping services provides more affordable options. It will stay within the new entrepreneurs’ budget. After all, outsourcing helps firms exclude the costs of recruiting a full-time bookkeeper.
7. Ensure compliance with tax laws.
Outsourcing bookkeeping can also help new entrepreneurs. It can ensure compliance with tax laws. Tax laws are complex and constantly changing. So, it can be challenging for new entrepreneurs to keep up with the latest requirements. Professional bookkeepers can help ensure businesses comply with all tax laws. They reduce the risk of penalties due to errors in financial records.
8. Focus on core activities.
Outsourcing bookkeeping helps businesses save valuable time. This time can be redirected toward more strategic activities, too. New entrepreneurs can focus on sales, marketing, etc. Thus, it can help business growth in different areas.
End Note
Bookkeeping is a crucial action that can help you compare your profit this year to last year. It is because you now have accurate financial data to make smarter decisions. Sometimes, you need more time to do your bookkeeping. So, consider hiring an expert to help you with bookkeeping basics for new US entrepreneurs. That gives you the financial statements to make intelligent, profitable decisions.
Fino Partners is a prominent outsourced bookkeeping and accounting business. It has a vast pool of accountants and CPAs to handle your new US entrepreneur's bookkeeping aids effectively. You can streamline your accounting process, too, with us.
