In the beginning, bookkeeping for small business was traditionally defined as simply entering your financial transactions. If this is still your definition of bookkeeping for small business, you may just be living in the dark ages.
There are very few financial transactions to enter anymore.
Where Is Bookkeeping for Small Business Now?
When I go to dinner with a client or a prospect, I hand over my debit or credit card. That card is swiped, and the total for the meal, plus the tip I’ve left, is charged on my card.
That transaction now travels down 2 paths. On my end, it’s an expense. It will show up in my bank feed tomorrow, and my QuickBooks Online program will likely recognize the name of the restaurant, where I ate, and then automatically code it to Meals & Entertainment. The next time I check my bank feed, I will confirm that this information is correct, and in a click, that transaction is added or matched into my register.
On the restaurant’s side, my transaction is a line item in a daily Z-out report. The bookkeeper for the restaurant will see it among a grand total of other transactions that happened that day. The bookkeeper will need to show the total sales for the day on an invoice in QuickBooks Online. Then the bookkeeper will apply payments to that invoice for the total of each payment method that customers used in the aggregate that day. My charge is included there.
Once the daily sales report is balanced for the restaurant, the bookkeeper can record the deposits. One for Visa and MasterCard. Another for American Express. Checks will be prepared to be deposited on the next day, and a separate deposit will need to be recorded for that.
Cash is a little tricky for the restaurant. Most people pay by credit card, including the tips, so there is a good chance that the restaurant has to tip out the servers, using more cash to pay out than was brought in on any given day. The cash received from customers goes into a petty cash account on the books. That same account includes the cash that is kept, perhaps in a vault in the back. On any given day there could be $500-$2,000 in there, depending on the size and volume of the business.
Tips are paid out with a check from petty cash. Then, if need be, the manager goes to the bank and withdraws cash to replenish the vault.
In everything I’ve described above in about 400 words there was not one financial transaction entered anywhere by any human being. The information flows electronically these days.
Bookkeeping, therefore, nowadays, needs to be re-defined as managing the flow of transactions from one place to the next.
Changing the Way You Think About Bookkeeping for Small Business
In order to even start to understand the basics of bookkeeping for small business, you have got to understand your own business. It’s a matter of thinking through the operations of your business and translating that into transactions.
- How do you make your money?
- How are you paid?
- Do you need to post an invoice to get paid, or do you charge a flat monthly fee to clients?
If it’s a flat monthly fee, then look at your web infrastructure. In my own case, I capture monthly payments from clients using Woo Commerce with WordPress. The clients sign up for a subscription. I don’t need to send invoices out. They get an email confirmation, each month, when their card is charged. Then the charge shows up in their bank feed or credit card feed and it is coded to Professional Fees: Accounting.
With the video above, we take a look at how to set up a new company in QuickBooks Online and how to use bookkeeping for small business.
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from Fundera Ledger https://www.fundera.com/blog/bookkeeping-for-small-business