But what about Bookkeeping?
Some of you might have heard about it. Do you know what it is and why it is essential to running a successful business?
If not, In this blog, we will try to tell you everything about the basics of Bookkeeping.
Here are the Points we will touch on:
What is bookkeeping?
In short, Bookkeeping is the process of keeping a track of all the financial transactions completed by a specific business from the start of the business to the current date. It can be done daily, weekly, monthly, or even yearly, depending on the company’s demands. The individual who does the Bookkeeping is titled a “Bookkeeper”.
Earlier, Bookkeepers used to do Bookkeeping on ledgers or paper journals. Around 500 years back, the bookkeeping method transformed with the introduction of double-entry Bookkeeping by Italian mathematician and Franciscan monk Luca Pacioli. Under this double-entry method, A bookkeeper used to maintain two separate books balanced accordingly to prepare the final financial statement.
Nowadays, creating a paper business journal with thousands of transactions can be a complex approach. In the modern era, relying on old-school ways despite having access to advanced bookkeeping software that can update thousands of transactions in a matter of time seems senseless.
As of Now, Bookkeeping businesses opt for highly advanced accounting systems where bookkeepers keep a record of all the financial transactions based on the related documentation. Here, the documentation could be anything, like an invoice, purchase order, receipt, or any financial record relating to a particular transaction.
Being highly beneficial, most people use a double-entry system approach. However, some small businesses still use the single entry system.
Also Read: Online Bookkeeping
Our Bookkeeping Process
1. Fill up the online application with your details.
2. Upload Your Documents
3. Get Approved and Receive your Documents On Your Email.
Type of entry system:
Single entry is an entry system used mainly by small businesses where they record all types of transactions as such at one place, whether it is an income or expense.
Double entry is chosen chiefly by big firms or sometimes small businesses if they want more clarity and want to put Bookkeeping to better use. Under this, each entry is recorded separately as an expense or an income.
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What are the types of bookkeeping accounting systems?
There are two types of Bookkeeping accounting systems, both are as follows:
Cash Accounting system:
The cash accounting system is chosen by small businesses, where the whole system is based on the cash flow. Under this, the Bookkeeping is done based on cash, that is:
- Paid or is about to be paid
- Received or about to be accepted.
In this accounting system, when the firm receives a cash payment with actual cash or a credit card or check, the Bookkeeper records it as an income.
Similarly, it is registered as an expense when the firm pays through real cash, credit card, or check under this type of Bookkeeping small business.
Accrual Accounting system:
An accrual accounting system is a more practical approach and covers the cash that is actually paid and received. The transaction is noted as income when the company receives payment in cash directly or in its account. Similarly, the transaction will be notable as an expense when the company pays in cash or takes off the money from its bank account.
For example, if a company has a cheque for $1000, it will be marked as its income only when it cash it out; till that time, it would count as a receivable.
Similarly, if the company paid someone $1000, it would be marked as its expense only when its client cashed out the cheque ; until then, it would count as payable.
Undoubtedly, the accrual accounting system is more complex to manage, but it is better than the cash accounting system. In the end, the accrual accounting system will give you a better picture to understand your business’s overall income and expenses.
What are the roles and responsibilities of a Bookkeeper?
As already explained, a bookkeeper is an appointed person responsible for managing the books of a business or firm. This person records the timely transactions of expenses and income so that the firm can get a clear understanding of whether its business is profiting or getting in a loss. Below is the list of some of the duties of a bookkeeper:
- Process all the payments related to the business
- Make entry and code all the bills
- Making and then even sending all the customer invoices
- Checking and collecting the customers’ due invoices
- Reconcile the business’ credit card and all the bank account statements
- Make monthly financial reports
What is the basic difference between Bookkeeping and accounting?
Bookkeeping and Accounting go hand in hand. Most people readily get confused with these terms. Experts consider that Bookkeeping is more like a part of the accounting process, and one cannot even conclude the outcome of accounting if the bookkeeping work isn’t complete.
Look at it this way!
A Bookkeeper collects all the transactional information from the business or firm, notes down everything in their accounting journal, sorts the transaction according to income and expense, and arranges the total revenue and expense as per the chart of account of that business.
Once done, now comes the accounting part.
The accountant will now handle all the transactions that the bookkeeper recorded. The transaction records need to be summarized monthly or yearly as per the business’s tax payments. Therefore, the accountant will go through all the transaction data. After this, the accountant will summarize and interpret all the transaction data for the firm stakeholders, including creditors, investors, owners, and employees.
What are the benefits of BookKeeping?
Bookkeeping has several benefits. Firstly it is essential, and one cannot give structure to your business if their books on Bookkeeping are not complete. Other than that, the Bookkeeping can serve the company with the following benefits;
- Bookkeeping provides a clear future about the company’s future and lets it plan ahead accordingly.
- Bookkeeping gives a detailed recording of all the financial transactions from starting to this date.
- Bookkeepers managing the firm’s books hold the liability and make sure all the transactions are legal in the eyes of the law.
- The company can have an updated balance sheet of its business revenue to show to your investors and other reliable company parties.
- Even before reporting to the IRS, the company will have an idea about your tax deductions from the balance sheets assembled with Bookkeeping.
- You will have clarity about the condition of your business bank accounts significantly earlier, and you will be able to act accordingly before time.
- If the company is doing well financially, it can show its bookkeeping books to the banks for easy loan approvals.
- A Firm can demonstrate its balanced sheets to the investors and shareholders to ensure that the business is on the correct path and its investments are paying them well.
- Bookkeeping cuts the cost of business accounting services, as most details are described already with just getting balance sheets of the company’s transactions by Bookkeeping.
- Auditing will become more accessible than ever. Instead of going through each financial transaction, the auditor just needs detailed financial reports to compare and prepare the audit report.
How to choose a Virtual BookKeeping service?
Despite having so many benefits of a bookkeeping company, one can deny that Bookkeeping is quite a time-consuming process. Instead of focusing on the business, the company will need ample time and concentration on Booking keeping.
However, companies don’t need to do it all by themselves when online bookkeeping services are available. These bookkeeping services are also called Remote Bookkeeping or Virtual Bookkeeping services. With this, the company gives access to its transactions and online bookkeeping software to an online bookkeeper. The bookkeeper will make entries based on the transactions using the free online bookkeeping software and confirm the financial transactions with the bank statements.
While looking for bookkeeping services for small businesses or even big corporations, LottaLegal can offer great help. We have a team of specialist bookkeepers specializing in managing the books with expertise and proficiency. Our Bookkeeping service works as follows;
Connect with professionals:
Once the company applies for our service, our experts will connect with them and explain the whole bookkeeping process. The company will need to provide all the business details to the Lottalgeal expert to initiate the bookkeeping service.
The professional bookkeeper will start working and complete the books on Bookkeeping based on your business’s financial transactions. If required, the bookkeeper can reach out to the company for more details.
Receive financial reports
At the end of each month, our professionals will give the business financial report, which the company can further use for taxation and other accounting purposes.
No Matter what type of business a firm runs, big or small, choosing Bookkeeping services can be the most intelligent decision one can make if they want the company to excel in its industry. Besides managing the business, doing Bookkeeping on your own can be troublesome. For that reason, one must choose a business bookkeeping service provider like LottaLegal, the most trustworthy bookkeeping service provider in the United States. We sort the business’s Bookkeeping with our professional bookkeepers that have years of experience in the market.
Hudson Anthony is a well-known Accountant specialist working in this industry for a long two decades. He always loved to write, but he switched to full-time writing just a few years back. With expertise in the Finance industry, he manages to pen down blogs that speak about excellence and Knowledge. Other than writing, he holds a great interest in travelling. He likes to tour untouched spots all around the world.
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BookKeeping is crucial as it gives a precise picture of financial dealings. The company can collect the data of these transactions, organize it, store it in a particular order and finally analyze it to get clarity about the business’s financial transactions.