Good preparation and documentation are critical for paying taxes (including payroll taxes) on time. For both sales and purchases, it’s vital to have detailed, complete records of all small business bookkeeping transactions. You’ll need to note the amount, the date, and any other important details to ensure you can accurately summarize your finances when it comes time for tax season.

To use double-entry bookkeeping, simply plan to handle every transaction twice—one in an expected way and another in a corresponding equal-and-opposite way. Depending on your industry, business model, and state of operation, you may not need to pay sales tax. To know what compliance looks like for your business, start by visiting your state government’s revenue agency website to clarify. For help finding that site, simply type “My state’s comptroller” in any search engine and look for a link with a URL that ends in yourstate.gov.

Log both invoices and receipts—but handle them differently

But before you can do any of that, you need to learn how to set up accounting books for small business. Small businesses also manage their own accounts receivable to make sure they get paid on time for goods and services that have already been bought or rendered. The process involves sending estimates and invoices and keeping track of due dates. Some accounting software comes with invoicing features, like automated payment reminders, or you may opt for separate invoicing software. Double-entry accounting enters every transaction twice as both a debit and a credit.

Absolutely, it is possible to handle your own bookkeeping, especially when you’re running a small business or just starting out. While manual methods like using spreadsheets work for some, others might find accounting software helpful for automating and simplifying the process. Keeping the books for a business, more formally known as bookkeeping, involves the systematic recording, organizing, and maintaining of financial transactions related to a business’s operations. This includes tracking sales, expenses, payroll, and other financial transactions. The goal of bookkeeping is to provide a clear, accurate, and up-to-date picture of a business’s financial health.

Are bookkeeping and accounting different?

Alternatively, in-house or outsourced bookkeepers can update your books for you, typically for a monthly fee. But whether you plan to do bookkeeping yourself or outsource it to an accountant, it pays to understand the basics of bookkeeping. Accounting software is the best of both worlds when it comes to difficulty and cost. Accounting software is a good option if you want to streamline accounting processes and save time without having to pay the price of having an accountant do everything for you. Not to mention, you don’t have to worry about calculating totals yourself since the software handles it for you. The thought of recording all of your business transactions may seem daunting.

• Analyze where you can cut some costs, and you can improve a narrow profit margin.
• Sales tax is added to the retail price of every online sale and is settled at checkout.
• Track your inventory on a monthly or quarterly basis to make sure it’s kept up to date.
• Try Shopify for free, and explore all the tools you need to start, run, and grow your business.

Bookkeeping tracks and documents day-to-day business finances, and accounting offers a more technical, big-picture, and high-level analysis of the business’s current situation and projected future. Additionally, bookkeepers may have certifications, but accountants have — at a minimum — an accounting degree, and they may have completed the certified public accountant exam. There’s good news for business owners who want to simplify doing their books.

Why is bookkeeping important?

In fact, it’s one of the best things you can do for your small business. When you automate bookkeeping tasks, you’ll have more time to dedicate to actually growing your company. You may think that combining your personal and business expenses is a good idea.