Basic Accounting For Small Businesses Owners
Updated: Jul 27, 2022
Tired of struggling to keep your financial records organized? Do you want to make good business decisions based on accurate information? Then you might want to brush up on your accounting skills!
Good accounting skills are essential for every business owner. Here are a few situations where they can be useful:
Applying for Business Loans.
Banks require your financial statements before they can grant you a business loan. With streamlined bookkeeping apps like LISTA, you can start organizing your transactions for eventual auditing and approval.
Giving a clear picture of where your money is going.
Bookkeeping can chart your cash flow (money going in and out of your business). It will help you differentiate between business-related expenses, and payments to loans or credit cards. Moreover, it presents an easy way to track the growth of your enterprise in terms of sales.
Detecting financial mistakes.
Going over the records is a neat way of catching common mistakes like overcharging or undercharging your customers.
Now that we’ve proven its usefulness, how about some quick beginners’ tips on bookkeeping?
Separate your personal finances from your business finances.
This will help you to avoid confusion that may arise from mixing these two.
Use either the cash or accrual methods of accounting.
The cash method is when you record transactions only when you have received the money that you are owed. The accrual method is when you recognize revenue once you have earned it but have not necessarily received payment yet, e.g., utang. The cash method is recommended for small businesses but it is easy to eventually switch to the accrual method.
Make detailed transactions.
Log details about each transaction you make. Classify sales and expenses to understand what you’ve sold and what you’re spending on. This way, you can keep tabs on which of your products sell better compared to others. Here are a few suggestions of what to log:
a. What the purchase was.
b. Where it was purchased from.
c. The amount it cost.
d. The date it was purchased.
e. The category of the product (sigarilyo, candy, coffee sachet, soap, etc)
Choose a bookkeeping system.
There are many examples of bookkeeping systems. You can do it by hand in a big ledger (which can be quite tedious) or you could download the latest bookkeeping apps for your smartphone. LISTA is an example of free bookkeeping software designed to help you with your daily accounting needs. Download LISTA now to simplify your life!
Click here for your free Lista App