Keeping accurate, organised and up-to-date financial records is the most essential part of running a small business. Not only does it help small business owners gain insights into their cash flow, but it also shows areas that need more attention, whether they can launch a new product and whether the business has the budget for improved marketing.

Bookkeeping is keeping a record of daily transactions, tracking income and expenses and keeping those records orderly. Accounting departments turn those records into reports, insights and plans.

Although not an interesting part of managing a small business, bookkeeping is essential when tax season comes around. It is around this time that small business owners should hire a certified bookkeeper to keep their finances accurate and compliant. 

Different Bookkeeping Methods Small Businesses can Use

Before small businesses sit down to get their finances in order, they must decide on the best bookkeeping and accounting methods to use. The correct methods keep small business financial data organised, accurate and useful for planning, budgeting and tax preparation. 

Small businesses have two options available:

•         Single-entry bookkeeping is the simplest approach for small businesses or start-ups, where they record every transaction once. This method is ideal for freelancers or very small businesses that need a lightweight system to stay organised.
•         Double-entry bookkeeping records each transaction twice, as a debit and a credit. While it requires more structure, it provides cleaner, more reliable financial information, particularly for businesses planning for expansion. 

After deciding on how to record the transactions, businesses can decide on the best accounting method. 

Cash-based accounting records income when money is received and expenses when they’re paid, offering a clear picture of real-time cash flow.

Accrual-based accounting records income earned and billed expenses, even if cash hasn’t moved yet. This method is the better option for long-term planning and businesses with ongoing projects.

While these systems help businesses stay on track, it’s essential to hire a certified bookkeeper to keep your finances accurate and compliant, especially when planning for expansion. 

Five Easy Steps to Bookkeeping for Small Businesses

With some planning and structure, bookkeeping for small businesses is not the daunting task many business owners think it is. 

Here is an easy guide to structuring your bookkeeping: 

1. Collect Finance Statements

As a small business owner, it is important you keep every receipt, invoice and bank statement, despite how insignificant they may seem. These statements indicate financial history, simplify bank reconciliation and give a good picture of the business’s performance. 

You can create spreadsheets to organise your transactions or hire a certified bookkeeper to keep your finances accurate and compliant. 

2. Categorise Business Transactions

To understand where the money is going means less stress over tax season and cleaner books. For this, you must sort every transaction into the relevant category, such as assets, liabilities, equity, revenue or expenses.

•         Assets are everything the business owns, including cash, gear, inventory or your brilliant ideas, which fall under intellectual property. 
•         Liabilities are what you owe, like bank loans, credit cards, including accounts payable.
•         Equity is the cash you’ve invested or taken out of the business.
•         Revenue, think of it as the profit coming into the business from sales.

•         Expenses, are everything the business has to pay to stay afloat, such as utilities, materials and supplies or marketing. 

3. Account Reconciliation

Bank reconciliation is comparing your internal financial records with those on your bank statements. Businesses usually reconcile their accounts weekly or fortnightly. While many businesses are moving towards automation, certified bookkeepers can perform this process efficiently and ensure every detail is correct. 

This step is essential for:

•         Detecting errors, double entries, or missing transactions
•         Identifying fraudulent or unauthorised charges
•         Ensuring GST and tax calculations are correct
•         Improving the accuracy of financial reports 

4. Financial Statement Preparation

Good bookkeeping is more than keeping accurate records. Its about managing the financial records that support these numbers. 

Three essential financial statements for every business are: 

A balance Sheet captures what the business owns, what it owes and the business equity. 

The income statement or profit and loss statement, adds everything the business has earned to all the expenses. It shows what the business made. If this sounds complicated, its time to hire a certified bookkeeper to keep your finances accurate and compliant. 

Cash Flow statement, show:

•         Net income: What you actually earned
•         Operating cash flow: Day-to-day cash coming in and going out
•         Investing cash flow: Money spent or earned on things like equipment
•         Financing cash flow: Loans, repayments, and investments 

5. Financial Statement Review

Regularly reviewing of the financial statements provides insights into business’s health, which helps you make smart business decisions. 

For example, if you are concerned that your balance sheet is dipping into the red because your business credit card balance keeps climbing, despite it wrapping up one of the busiest months. A quick review of your income statement shows that a local client still hasn’t paid for last month’s $5,000 job, leaving your cash flow tight despite strong sales. 

Monthly Bookkeeping Tasks for Small Businesses

An organised business keeps accurate records of everything that’s happening in the business. Business owners should set up monthly bookkeeping tasks to reduce the stress during tax season.

•         Start by capturing receipts and sending invoices while following up on overdue payments.
•         Record all income, outstanding bills, and any unusual transactions like refunds or transfers.
•         Categorise each transaction to keep your books organised, then reconcile your accounts to ensure they match your bank statements.
•         Review key financial reports, from your income statement, balance sheet, and cash flow, will provide a better understanding of your business’s performance and remain solvent.

Leave the books to the Experts

Small businesses can keep a good hand over their finances. Bookkeeping experts will keep accurate financials, organise, and be stress-free over tax season. Professional bookkeepers are trained to manage everything from transaction coding and payroll processing to reconciliations and reporting. 

For small businesses across Perth, My Bookkeeper Perth offers professional, certified bookkeeping services tailored to your small business needs. 

Visit https://www.mybookkeeperperth.com.au to learn how expert bookkeeping support can help your small business stay compliant, profitable, and financially confident.