What is Bookkeeping? 2025 Business Owner’s Guide

Bookkeeping has its benefits, but it also comes with a few disadvantages, depending on whether you’re hiring someone or doing it yourself. Here are some bookkeeping drawbacks you might face as bookkeeping a small business owner. Bookkeepers can handle invoicing, track incoming payments, and manage bill payment.

What is a bookkeeper’s job?

• The standards also help protect the shareholders of both public and private companies by ensuring that financial statements provide meaningful valuations and comparisons from one company to another.
• If a general ledger is like a book, a chart of accounts is like a book’s table of contents—it’s a list of all the accounts your business uses to record transactions.
• If you’re unfamiliar with local and federal tax codes, doing your own bookkeeping may prove challenging.
• Your general ledger is organized into different accounts in which you record different types of transactions.
• For instance, you’ll record income when a customer pays you and expenses when you pay your bills.
• Bookkeepers might also have degrees in accounting, but most have either technical certifications or on-the-job experience.

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. If a general ledger is like a book, a chart of accounts is like a book’s table of contents—it’s a list of all the accounts your business uses to record transactions. In this metaphor, each account is like a chapter of a book, and individual journal entries are kind of like the pages of each chapter. Along with reading this page to get a quick bookkeeping overview, we always recommend meeting with a CPA (certified public accountant) or bookkeeper before you open your doors. A financial expert can give advice specific to your unique business and give you a more in-depth look at basic bookkeeping principles.

DIY bookkeeping

It offers features such as invoicing, expense tracking, and payroll processing. Bookkeeping is mandatory for businesses that exceed $250,000 in gross sales. These books and records are subject to examination by IRS, New Jersey, or any other states in which sales may occur. Proper bookkeeping gives companies a reliable measure of their performance. It also provides information to make general strategic decisions and a benchmark for its revenue and income goals.

Internal management reports

Data entry involves entering your business’s transactions into your bookkeeping system. As mentioned above, a lot of the data entry now happens automatically, either through OCR or bank feeds. BILL provides a comprehensive financial operations platform that streamlines invoicing, bill pay tasks, and expense management to make them even easier. Plus, it integrates with modern accounting software options to feed that info straight into your books.

How much does it cost to hire a bookkeeper?

A bookkeeping course can be a useful way to learn the fundamentals needed to prepare financial reports, organize data using tools like Microsoft Excel, or understand how to balance books. Online bookkeeping services might be the exact solution you need to save both time and money. The service you decide to use depends on the needs of your business and may include extra features such as payroll or tax documents. Cash basis accounting focuses on the movement of cash in and out of the company—transactions are only recorded when cash changes hands.

Preparing financial statements

• We helped a local restaurant owner in Old Bridge, NJ, streamline their bookkeeping process, identify cost-saving opportunities, and improve their financial forecasting.
• It requires you to record each financial transaction just once in your overall bookkeeping record.
• If you enjoy organization and numbers and have experience with bookkeeping, starting your own business offering this service might be a smart career choice.
• Transactions include purchases, sales, receipts and payments by an individual person, organization or corporation.
• Bookkeepers make sure the information in the books is accurate and that the books are reconciled each month.

Proper record-keeping for small businesses makes the process easier and keeps you compliant with the law. You never want to waste time chasing down last month’s missing invoice, and you certainly don’t want to find yourself in trouble with legal requirements. Visit SBA.gov to find out more about how small businesses can stay legally compliant.

At the end of the period, you’ll “post” these entries to the accounts themselves in the general ledger and adjust the account balances accordingly. Your general ledger is organized into different accounts in which you record different types of transactions. Bear in mind that, in the world of bookkeeping, an account doesn’t refer to an individual bank account. Instead, an account is a record of all assets = liabilities + equity financial transactions of a certain type. Take routine bookkeeping off your never-ending to-do list with the help of a certified professional.

How to become a bookkeeper

Outsourcing the work to a seasoned bookkeeper can allow you to focus on your business plan and growth. Whether it’s a natural disaster, hardware failure, or a cyber threat, you never know when the unexpected will strike and leave financial data vulnerable. Consider using secure cloud accounting software that automatically backs up your data and keeps it accessible at all times. Your general ledger should be up to date so that your bookkeeping software is able to provide functionality that you can navigate easily.

Integrated solutions for modern business

She is a QuickBooks Online ProAdvisor, LivePlan Expert Advisor, FreshBooks Certified Partner and a Bookkeeping for Etsy Sellers Mastery Level Certified Profit First Professional. In 2012, she started Pocket Protector Bookkeeping, a virtual bookkeeping and managerial accounting service for small businesses. The “monthly close” is the process of squaring everything up, checking the information in your books against bank statements, loan statements, and so on. This helps you spot any bookkeeping errors early as well as monitoring for fraud or theft. Today, even professional bookkeepers rely on accounting software to help them adhere to these standards. Following these standards ensures that your business complies with IRS guidelines, state income tax guidelines, and other tax guidelines such as employment tax and state tax.