The daily responsibilities of running a business can add up fast. You’re busy helping customers, following up with projects, and making sure your processes are running smoothly. Even still, you can’t ignore what’s going on in the “back office.” Your accounts tell the story of how well your company is growing and thriving. When you have accurate bookkeeping practices in place, you’ll be better equipped to catch problems before they get out of control.
Setting Up Your Business Accounts
Having good bookkeeping starts with selecting the right accounting method. Some companies work better recording transactions on a cash-basis, and others use accrual-basis books. Depending on how much business you do and the types of services you provide, one option will be better than the other. For example, a lot of sole-proprietors and smaller companies use cash-basis. Companies that use a lot of vendors and manage accounts payable tend to go with accrual-basis systems. You’ll need to use the right one to have good bookkeeping.
Bookkeeping with Timely Transactions
The next step for managing your bookkeeping is to review your chart of accounts. Typically, this is divided into six groups: assets, liabilities, equity, income, cost of goods sold, and other expenses. From there, you’ll have a variety of different sub-categories to track everything appropriately. You’ll want to classify each transaction appropriately to get a clear look at your gross income. This is the foundation for your company’s financial statements.
Making sure you track each transaction on-time will help you have an accurate reading on your accounts. Often this happens with a monthly close process. If you can seamlessly review your accounts each month, you’ll be in a much better position when tax season rolls around. That way, you can catch mistakes sooner, and then get any help you might need to correct your records moving forward.
Use Statements to Stay In-the-Know
Income statements and balance sheets are the lifeblood of your company’s financial wellbeing. If you don’t know how to prepare or review these statements, then you’re probably missing out on key information for your sales process and projected earnings. The income statement shows your gross profit (income minus your expenses). The balance sheet give an overview of your cash flow (your liabilities and equity).
You can use your income statement to understand where your company stands month-to-month or on an annual basis. It restarts every year. The balance sheet, on the other hand, is ongoing. That means you can pull records from just about any period in time—so long as your books are accurate.
Proper bookkeeping is a valuable part of running your business. You need to know what kind of money you’re bringing in and where your expenses are going. But managing your books doesn’t always come easy. That’s why lots of business owners choose to outsource their bookkeeping services. If you fall into that camp, please know that our team here at NSO and Company is here to help! Give us a call at (317) 588-3131 to set up a consultation. Together, we can review your company goals and make sure you’re on track for all of your business goals with timely, accurate bookkeeping.