Most people associate the word “Bookkeeping” with scenes from classic gangster films with back-alley deals, horse betting, and offers that one can’t refuse. However, the reality is entirely different from all these things. Bookkeeping, as understood by the creators of an online expense tracker application for smartphones, is an arduous and time-consuming task. It’s like a marathon that begins the day you open your business and goes on as long as the company stays alive.
If you’re a business owner, then you will inevitably want to know a few things about bookkeeping. You may hire the services of a professional bookkeeping agency or an individual who specializes in this task even after knowing the basics. After all, you have many other chores to take care of. You don’t even get enough time to use an online expense tracker app that you installed on your phone.
Nevertheless, it never hurts to know a few basic things about bookkeeping, especially if you own a business company. The term simply means keeping tabs on the financial transactions of your business and its expenses. If you check Wikipedia, then it says “Bookkeeping is the recording of financial transactions, and is part of the process of accounting in business. By an organization or any corporation, transactions include such as purchases, sales, receipts payments, and inventory. There are many standard methods available to maintain bookkeeping such as single entry and double entry but any process that involves the recording of the financial transaction is called bookkeeping activity.
Regardless of the size and scale of your business, you have to implement proper bookkeeping techniques, even if it incorporates using a free invoice maker app and maintaining records of those invoices.
It means that the path you choose for accounting purposes is entirely up to you. You may have a loathing for third-party bookkeeping service providers, but it shouldn’t prevent you from keeping solid records of business transactions.
If you avoid bookkeeping, then you’ll lose huge sums of money in potential deductions. Apart from that, you may also lose compliance with tax agencies. If the latter happens, then you won’t be eligible for deductions. Furthermore, you might even end up being in debt with the tax collection firms.
About good bookkeeping practices
Whether you use a Time Tracker app or not, you can’t ignore bookkeeping as it’s the foundation of any business structure. Here are some of the most common pitfalls associated with bookkeeping and the ways to avoid them.
- Transactions that you didn’t reconcile: If you have transactions in your books that you didn’t reconcile, then you should know that your books aren’t up-to-date until you categorize them correctly. You should always think and act chronologically.
- Loan payments: You may have loan payments on your books. If you didn’t account for the principle and interest potions of the payments correctly, or if you categorize the whole payment as a single expense, then your books are incorrect. You must always account for the principle and the interest as well.
- The “shoebox”: The term “shoebox” in bookkeeping means that you didn’t start noting down your business’s expenses because your receipts are still sitting inside a box somewhere. There is no other way to avoid this pitfall apart from abandoning this practice entirely and implement correct accounting principles from the beginning.
- Inventory count: Your books may have incorrect values for inventory and cost of goods. It can happen due to a miscount or theft. Keeping count of the inventory is particularly important for people who sell physical products. You should always stay current on inventory.
- Payroll: Your payroll needs truing, just like the wheel of a bicycle. To show gross payroll without any manual adjustment then standard feed required for maintenance.
- Accrual basis bookkeeping: Specific accounts require manual updating at the end of a year. This task can prove to be extremely difficult for you if you don’t have an accounting background. You should discuss the matter with an accountant or a CPA.
- Cash flow: Many businesses fail because they experience cash flow problems. The only way to manage your cash flow is to keep an eye on your accounts receivables and account payables.
- Tracking expenses: Keeping track of digital invoices, paper receipts, and recurring expenses can be challenging for business owners. Without a proper system in place, keeping track of your expenses can be next to impossible. You should use an online expense tracker to see where you’re spending. The data that you gather from the app will allow you to fill the voids in your accounts.
- Fraud: Business owners, especially small businesses trust their employees and their resumes more than they should. The creators of the best free invoice maker app warn business owners like you to stay wary of your employees because some of them will always try to take undue advantage of that trust. You may not be able to stop them directly, but you can establish consistency and transparency in your accounting department. In doing so, you can stop those fraudsters in their tracks.
Now you should be able to understand that the importance of bookkeeping far outweighs that of a Time Tracker. You can also see that bookkeeping comes with a lot of challenges. That’s why you need to hire a bookkeeping specialist to take care of your accounting tasks. It’s the easiest way to overcome all the problems associated with bookkeeping.