How To Start a Bookkeeping Business in 8 Steps + Checklist

Bookkeeping is how businesses, entrepreneurs, and decision-makers monitor a company’s overall financial health and activity. Without basic bookkeeping practices, it’s easy for financial transactions and spending activities to get out of control, which can lead to confusion, disorganization, and loss of profit. If you only need basic accounting features like income and expense tracking, then you may benefit from free accounting software like Wave.

Accounting software connects with your bank accounts

The chart of accounts lists every account the business needs and should have. If your state imposes an income tax, you’ll also be responsible for making estimated tax payments to your state agency. A business plan may be required if you plan to apply for business financing from banks or investors. Before you choose your business name, make sure someone else isn’t already using it, lest clients get confused. Also, run the name by a few people to see the impression they get of it. Once you have your finalists, run the names through your secretary of state’s business name database to make sure it’s available.

Accurate budgeting

A proper financial data management system can provide valuable, actionable insights and prevent problems, such as skimming fraud. As a bookkeeper, you oversee the first steps of the accounting cycle, while an accountant typically handles the last two. Another tool that will make your life easier is practice management software. This can help you organize and track the progress of client work and, in some cases, provide a portal to access your client’s books. QuickBooks and Xero offer the best accounting practice management software that’s integrated with their accountant software.

• For as little as $299 monthly, Bench costs far less than you would pay a local independent bookkeeper, and you can even add on tax filing and advisory services.
• Choose the accountant that can offer you the best working relationship.
• You’re not actually making or losing any money—it’s just in a new place.
• Not only does becoming a QuickBooks ProAdvisor add instant credibility, but it also brings your business exposure to an entire network of QuickBooks users.
• Instead of putting it aside to pay later, enter it into your accounts payable to be paid by the due date.
• Xero gives companies with inventory a solid option for unlimited users and a much lower price.
• This helps your bookkeeper catch more deductions, and will make your life easier if you get audited.

DIY Bookkeeping Tools and Resources for Small Businesses

To analyze which type of sales amount to the largest profit for your company, you must segregate in-person sales from online sales. This means you’ll have an accurate valuation of the item and your expenses related to depreciation are accurate. Historical cost may factor in when you’re accounting for lump-sum purchases.

• You will check bank deposits for fraud, fix balance sheet errors, and maintain accurate payroll records.
• You can go for accounting software like FreshBooks to finally get rid of spreadsheets, manual number crunching, and suchlike.
• Assets also include fixed assets which are generally the plant, equipment, and land.
• They offer secure online storage for all financial data accessed from anywhere with an internet connection, giving business owners real-time access to their financial information.
• However, you don’t actually pay the fee until you’ve received the parts, in February.

How to Start Bookkeeping in a Small Business

Choosing between single and double-entry bookkeeping often depends on your company’s volume of transactions. With single-entry bookkeeping, you record each transaction as a single entry – this method is similar to balancing a checkbook. If you handle a low volume of business transactions, single-entry is probably enough. Double-entry bookkeeping requires at least two entries per transaction — a debit from one account and a credit to another.

Your job as a bookkeeper entails systematically keeping track of an organization’s financial transactions. For the information to be reported as a financial statement, it needs to small business bookkeeping be identified, accepted, classified, and recorded. Learn more about bookkeeping, how it differs from accounting, the required qualifications, and bookkeeping jobs and salaries.

Accounting software saves you time, money, and stress

Find out more on bookkeeping accounting skills, how to earn accounting degrees and bookkeeping certifications, getting jobs, salary expectations, and more. Danielle Bauter is a writer for the Accounting division of Fit Small Business. She has owned Check Yourself, a bookkeeping and payroll service that specializes in small business, for over twenty years. She holds a Bachelor’s degree from UCLA and has served on the Board of the National Association of Women Business Owners.

Visit SBA.gov to find out more about how small businesses can stay legally compliant. Now that you’ve balanced your books, you need to take a closer look at what those books mean. Summarizing the flow of money in each account creates a picture of your company’s financial health. You can then use that picture to make decisions about your business’s future.

Designed for small businesses, Kashoo features an all-inclusive pricing structure, and you can add additional users to Kashoo at no additional cost. Instead of tossing that receipt on your desk for later, it’s time to start accounting for it properly. How will you know you need to reduce expenses if you don’t know what those expenses are?

Software is rated based on its price for various levels of users, including one, three, and five users. It is also awarded points if it offers a free trial or discount for new users and if monthly vs annual plans are available. Sage 50 scored very well across all the major accounting features that we looked at in our case study. One of the few missing accounting features was a way to group paper checks and cash into a lump sum deposit amount so that the check register matches your bank statement.