Taking care of your business finances is an implicit part of your business. While running your business, it is important to maintain the cash flows, profit, losses and other important financial information. Hence bookkeeping is an intricate part of your business.
What is bookkeeping?
Bookkeeping is an art of maintaining your day to day finances. It is the process of updating your financial transactions regularly. All your purchases, sales, profit, losses and taxes should be recorded; and this is called as bookkeeping. It records all the financial effects of transactions related to your business. This also includes recording the receipts and the payments made. Ideally, the person doing all this is referred to as a bookkeeper. The book that is used to maintain this information is called the daybook or the cashbook.
Initially, in the olden days, all the bookkeeping was done manually. But, now a days, there are a large number of software available which do the process of bookkeeping for you. This is called the electronic book keeping and makes the process less tedious and less time consuming.
What are the types of bookkeeping?
Depending on the scale of your business transactions, you could choose between the two types of book keeping that are available:
• Single entry bookkeeping
• Double entry bookkeeping
If your business is a small one, then you could choose to use the single entry bookkeeping. Using this makes your process of cash maintenance easy, informal and simple. It involves maintaining the cash flows, receipts and some petty cash statements – as well as some monthly summary of cash disbursements. However, since it lacks detailed recording it is prone to errors.
Double entry bookkeeping is a more formal way of doing the same. This type of bookkeeping is more complex and it gets in the process of debit and credit too. Since it is detailed, it is more accurate and less prone to errors. It is also the most reliable type of maintaining your business’ financial information.
Which type of bookkeeping best suits your business?
Since there is a significant difference in the ways of bookkeeping, it is important to understand what your business requires. Quite obviously, double entry bookkeeping is more accurate and reliable and hence would cost the company more. If your company requires to maintain a detailed report of the day to day transactions, then it would be preferable to select the double entry bookkeeping, else, the more cost-efficient single entry bookkeeping would suffice all your financial needs.
Also, you can choose between manual and computerized book keeping. The manual bookkeeping involves maintaining of all your information in the paper format. This type of bookkeeping is still followed in some small businesses, where financial transactions are limited and less complex. The computerized bookkeeping, however, is gaining more advantage these days. It is new and innovative way of maintaining all your records. It is flexible, faster and convenient. The bookkeeping software’s available these days are very robust and could handle many types of financial data, thus making it robust for any kind of business that you are running.
Actaeon Consulting based in Alpharetta, GA offers accounting services including outsourced accounting & bookkeeping, financial analysis, back office support, and tech consulting to businesses in Atlanta, Norcross, Roswell and neighboring areas. For more details, visit Actaeonconsulting.com/Services.