How to handle bookkeeping in your small business
You may want to do some bookkeeping jobs yourself and get an expert to help with others. Perhaps you’re still feeling your way with double-entry bookkeeping, or you’re afraid of getting payroll wrong, or you’re not cut out for chasing invoices. You can outsource any or all of those things.
We’ll look at how businesses commonly break up bookkeeping jobs between themselves and professionals.
Common DIY bookkeeping jobs
Many small businesses look after their own:
- Data entry: Nowadays, software can pull transaction data from banks and read photographs of receipts, so this has become a much smaller job.
- Bank reconciliation: Most business owners take on bank reconciliation. While still not necessarily a favourite job, apps that allow you to do it on your phone have sped things up.
- Accounts receivable: Preparing and sending invoices is straightforward if you have good templates and processes. You can always get professionals to help to chase overdue invoices.
- Accounts payable: If a business has just a few suppliers and cash in the bank, paying the bills is simple enough. But professionals can really help if cash flow starts to become an issue.
Small business owners may also keep payroll in-house if they have just a few employees and the capacity and skills to manage it.
Outsourced bookkeeping jobs
Even business owners who are comfortable with numbers will get outside help with:
- Quality control and fix-it jobs: Bookkeepers can check your ledger for mistyped or misplaced entries, and generally make sure your books are reconciled.
- Financial reports: Income statements, balance sheets and the like determine your taxes and inform big decisions. You don’t want to make mistakes here.
- Tax returns: Simple returns may be easy enough for a business owner to prepare but it’s good to use a professional if there’s any complexity. They may also find ways to lower your tax bill.
- Understanding what all this stuff means: A bookkeeper can interpret financial reports for you, and tell you what they mean for your business. They can help you troubleshoot problems as well as plan for the future.
- Payroll: Payroll gets hard fast, so it’s a good idea to involve an expert at some point and perhaps outsource it altogether if staff numbers grow or your payroll is complex.
Hiring a bookkeeping service
Bookkeepers often allow you to choose from different service levels depending on your budget. That means you can start out with basic bookkeeping at a modest cost and add on more advanced services as your business grows. Learn more about professional bookkeeping services.
What does software do?
For most small businesses, the choice between DIY and outsourcing comes down to time versus money: Which can you afford to give up? Software lessens the blow on both sides. It automates or streamlines time-intensive tasks like data entry, bank reconciliation, invoicing and some tax prep jobs. That cuts back labour which either saves you time, or lowers the fees that you pay to professionals.
Disclaimer: Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the provided content.
How to do bookkeeping
Bookkeeping includes everything from basic data entry to tax prep. Let’s look at the core jobs and see how they’re done.
- How to do bookkeeping
Small businesses can do their own bookkeeping or outsource to professionals. We look at how to find a good balance.
- Setting up a chart of accounts
Stepping up to do the bookkeeping in a new business? You may have to set up the chart of accounts. Let’s look at how.
- How to do bookkeeping data entry
Data entry is the foundation of bookkeeping. Enter the numbers right and you’ll learn exactly how the business is doing.
- How to do bank reconciliation
Humans aren’t always perfect at punching numbers. Bank reconciliation is a way to do quality control on your books.
- How to manage accounts receivable
Many businesses issue invoices, and those invoices need to be tracked. Learn how to manage accounts receivable.
- How to manage accounts payable
Paying bills isn’t glamorous. But they’re debts and need to be dealt with. Let’s look at how to manage accounts payable.
- Creating monthly financial reports
There are dozens of financial reports that you could create. But there are some monthly mainstays that bookkeepers love.
- How to do payroll
If all you had to do was pay staff, it would be easy. But there’s more to it than that. Let’s look at how to do payroll.
- How to prepare tax returns
Tax returns can be hard for small business owners. There are deadlines to make, and rules to follow. Let’s take a look.
- Using bookkeeping software
Whether you do a lot of your own bookkeeping or outsource it all, software can help you save your time and budget.
- Using professional bookkeeping services
If you don’t have the time or confidence to take on bookkeeping, a professional can help. Let’s look at what they do.
Download the guide on how to do bookkeeping
Learn about the eight core bookkeeping jobs, from data entry to reporting and tax prep. Fill out the form to receive the guide as a PDF.