Bookkeeping For Small Businesses

As a business owner, do you know you lose a lot of money every day? Do you know that you are ripping yourself off every working day? And even funnier, do you know you are being your own worst enemy? That it’s all your fault, you’re losing money? Let me walk you through how bookkeeping for small businesses work.

Have you heard of bookkeeping? Especially bookkeeping for small businesses? I’m not just talking about stacking a bunch of receipts inside a drawer or tying receipts or invoices up with rubber bands or staples and throwing them into an old box. No, I’m talking about proper bookkeeping, recording every part of your business. Every business needs this, including small businesses. Bookkeeping for small businesses can never be overestimated

Let me help you; bookkeeping tracks all financial transactions to see where your business is spending money, where your revenue is coming from, and which tax deductions you can claim.

Organizing your business’s finances can be overwhelming, but it’s crucial to your company’s success. Keep track of your income and expenses easily by learning how to set up proper bookkeeping for small businesses. This skill will help you make intelligent decisions about your money and give you peace of mind by knowing where your business stands.

But the problem is, how do you start bookkeeping for your small business? Before I answer this, let me list out some benefits of bookkeeping for small businesses.

BENEFITS OF BOOKKEEPING FOR SMALL BUSINESSES

1. It helps you get more tax deductions

If you didn’t know, the government offers tax deductions to businesses.

For example, if you are into furniture supplies and it costs you N10m to acquire the materials you need to produce the furniture, you will likely be charged an extra 5% of the N10m (N500k) as Vat.

Consequently, if you sell the furniture for N15m, you will charge your supplier N750k Vat. When you are remitting to the government, you should deduct the N500k that you paid from the N750k you collected, giving you a net remittance of N250k only, not the entire 750k.

However, many businesses don’t know this; hence, they give away free money to the government, leading back to the introduction of this write-up. Companies are losing a lot of money due to ignorance. Read this article to explore other tax deductions the IRS offers.

2. It can help you get a business loan.

Imagine you are applying for a small business loan. In that case, banks will want to see your financial statements, not just bank statements, but ones that show your expenses and revenue otherwise known as an income statement, and you can get this through bookkeeping.

3. It helps you catch financial mistakes

With bookkeeping, you can catch bank errors, paying somebody twice, and sneaky subscriptions for services you forgot to cancel. The numbers never lie, and a smart accountant once said, “Numbers tell a story,” and would ALWAYS tell you what might be wrong with your business.

4. Gives a clear picture of where your money is going

Bookkeeping helps you know where your money is coming from and where it is going; this makes budgeting and a lot of other business decisions a lot easier for you. With clear records, you can tell exactly what is going on with your business, and this equips you to make sound business decisions at any given time.

HOW TO PROPERLY DO BOOKKEEPING FOR SMALL BUSINESSES

1. Separate business and personal transactions

Having separate accounts for your personal and business transactions would be advantageous. It makes it easy to understand your net profit, and it also makes it easy for the IRS to know how much your business generates without interference.

You can open a QPay account for an easy, stress-free way to collect payments in your business. You can also keep track of your finances automatically with our FREE inventory management system, which comes with our POS machine, and access them anytime you want. To open a QPay account today, click here to get the application.

You can also follow this guide to help you understand how to apply for a QPay POS machine.

2. Single vs Double Entry

You have to decide whether you will use the single or double entry method of record keeping.

Double Entry records credit and debit.

Single Entry records your transactions once they happen; I highly recommend it if you run a sole proprietorship or small-scale business. I would also advise that you learn the double entry method if you intend to scale up your business and grow.

3. Cash vs Accrual Accounting Method

In the cash method, you only recognise revenue when you see it. For example, if you provided a service in October and invoiced for it in November but didn’t receive payment until December, the transaction would be recorded in December’s books.

In the accrual method, you recognise revenue immediately after you provide the service, whether or not payment has been made.

4. Choose a bookkeeping system

You could either choose a manual system, by excel or paper, or use an automatic system using accounting software like Wave, Xero, QuickBooks, e.t.c. 

Click here to see excel templates you can use for your bookkeeping.

For your inventory management, you can also depend on our FREE inventory management software embedded in our POS machine to take care of your inventory records. Click here to see how to get a QPay POS.

5. Categorize transactions

Categorising your transactions will help you to see the total you spent on each category at the end of the year. It gives better context, which helps with reflection on your spending. This enables you to identify money wasters within your business that may not be of importance to how you make money. You are able to understand in one quick glance what your business spends on and where your business makes the most money from.

6. Organize and Store

You need to organise and store your records. Here are two major rules to guide you in managing your records.

Rule 1

If the expense is over N1000, you should keep a record to prove the expense.

Rule 2

You should keep every receipt and record for three years.

7. Make it a habit

It can be challenging to keep records, especially if you don’t have a background in accounting, but it’s only advantageous to you and your business if you keep records.

I recommend picking at least one day per week to enter all your transactions.

By keeping records of your business finances, you can save a lot of money from taxes; you can reflect on your spending habits and prevent mistakes and unnecessary expenses. Bookkeeping for small businesses is so important. Take that step, stop losing money, stop ripping yourself off, start saving your business, and start bookkeeping.