Bookkeeping services are 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 US businesses. Many freelancers are focusing on bookkeeping. They can analyze their critical financial information anytime with proper bookkeeping. This will help make important financial decisions for US businesses. Here, we are going to explore the basic ideas of bookkeeping. It also gives a guide to freelancers on bookkeeping.
Outsourcing Bookkeeping
Outsourcing bookkeeping is a practice among new US business owners. Many business owners need help to handle it. They may need more time. However, bookkeeping is essential for the smooth growth of US businesses. 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 business owners save on maintaining a full-time employee. It can help US businesses save time, money, and resources while significantly improving their financial management. It gives owners control over their finances.
Related:- Benefits of Outsourcing Bookkeeping for US Business
The First Seven Steps of a Bookkeeping Process for Freelancers
There are some important steps in the bookkeeping process. It will explain the basics of bookkeeping also. Here are the essential seven steps to get your bookkeeping process.
1. Choose a system for document storage.
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.
2. Organise 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.
3. Make bookkeeping a habit
New US business owners 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.
4. Separation in business & personal expenditures
The primary part of grasping your finances is simple. You need to get a bank account and separate your business and personal expenses. Liability is one reason. There needs to 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 is hard. It can even result in unnecessary stress. It will also cause confusion 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.
5. 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. Basically, 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 don't have a lot of bookkeeping experience (or don't have time to learn), they could stress you out and help you. It is especially true if your accountant ends up telling you you've been using them incorrectly for the past year.
Related:- Top Bookkeeping Tools for Small Businesses in the USA
6. 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.
7. 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. If you're just starting out, doing your books independently, single-entry is probably right for you. 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.
Related:- Understanding Double Entry and Triple Entry Accounting in the US
Advantages of Bookkeeping Must Know to Freelancers
There are many advantages of bookkeeping in US business. These advantages shall also be known to freelancers. It involves:
1. Ensure compliance with tax laws
Outsourcing bookkeeping can also help business owners. It can ensure compliance with tax laws. Tax laws are complex and constantly changing. So, it can be challenging for business owners 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.
2. Focus on core activities
Outsourcing bookkeeping helps to save valuable time for business. This time can be redirected toward more strategic activities, too. The business owners can focus on sales, marketing, etc. Thus, it can help business growth in different areas.
3. Valuable insights & analysis of their financial data
Additionally, outsourcing bookkeeping can give business owners valuable insights into their financial data. Professional bookkeepers can help new business owners 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 business owners 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 involves access without hiring a full-time accountant. The business owner can access detailed financial reports with just a single click. It will offer insights into the various parts of business. Thus, the owners can quickly review cash flow history, profit and loss statements, etc.
The diligent record-keeping of bookkeepers retrieves comprehensive information quickly and straightforwardly. This data can be effortlessly shared with partners and financial consultants.
5. Scalability
Outsourcing bookkeeping services can be scaled up or down based on needs. The level of service will quickly increase as the US businesses grow. This allows the US businesses to accommodate the increased workload without worrying about hiring and training additional staff.
6. Saving time
Another benefit is saving time. The time is valuable for every business owners . Thus, spending hours each week managing your books can take away from more critical tasks. It involves growing business or developing new products. It helps to free up time to focus on these vital areas.
Outsourcing bookkeeping helps US businesses to get modern technological benefits. It can help streamline their financial management tasks. It also reduces the risk of errors and increases efficiency. After all, it provides greater transparency into the US businesses’ financial health.
7. Cost savings
Cost savings are a primary advantage of outsourcing bookkeeping. US businesses 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 US businesses’ budget. After all, outsourcing helps firms exclude the costs of recruiting a full-time bookkeeper.
Related:- How Virtual Bookkeepers Manage Cash Flow for U.S. Freelancers
Bottom Line
Bookkeeping provides the foundation for financial clarity in US business. It supports cash flow management and aids in budgeting for US business success. Many freelancers are interested in learning more about bookkeeping. It will be helpful for their freelancing profession. To leverage these advantages for your business outsourced bookkeeping, consider partnering with The Fino Partners, a team of experienced Certified Public Accountants committed to client satisfaction and financial integrity. Explore how their expert bookkeeping services can help you manage your cash flow and budgeting, ultimately leading your business to economic success.
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