Small Business Bookkeeping 101

Effective bookkeeping is essential for the success of any small business. It involves organizing and categorizing all financial transactions to get a clear picture of the flow of money in and out of the business.

Gone are the days of manually recording transactions in ledgers, as modern technology now offers bookkeeping software that streamlines the process and provides more accurate results. This software keeps a record of all the expenses and revenues, allowing business owners to have a better understanding of their financial standing.

Bookkeeping is crucial for any small business as it helps to monitor the financial health of the company, make informed decisions, and ensure compliance with tax laws. So, whether it’s done by hand or with the help of software, keeping track of the financial transactions of your small business is a must.

Understanding the Ins and Outs of Small Business Bookkeeping

Bookkeeping for small businesses is typically less complex compared to larger organizations. With fewer sources of revenue and expenses, the accounting requirements are less demanding.

Small business owners are often focused on achieving quick and sustainable growth. To support this goal, they often opt for software systems that cater specifically to their needs. These systems are designed to provide the necessary information and insights for making informed decisions, without overwhelming the user with unnecessary details.

What About Bookkeeping Templates?

Organization is key to success in business, and keeping track of financial transactions, products, and services is crucial to this. By having a clear understanding of expenses and revenue, you can make informed decisions to drive profitability.

How to Bookkeeping for Small Business

Using pre-made templates for accounting can simplify the process and ensure that you have all the necessary financial fields covered. These templates provide a straightforward and easily understandable record of business and personal expenses that can be used for tax purposes.

Choosing the right template for your business finances can give you peace of mind and help you manage your accounts with confidence. Having all your records in one place, recorded in a neat and organized format, eliminates the need for last-minute scrambling to gather information for tax returns.

Several software options are available that offer simple data entry and handle the bookkeeping needs of small businesses. These solutions make accounting and bookkeeping much more manageable and efficient.

How to Choose the Best Bookkeeping Template?

The internet is overflowing with free software options for small businesses when it comes to bookkeeping templates. A simple search for "Bookkeeping Templates" will yield numerous results.

Many websites offer free balance sheets that help you keep track of your bank account and credit card statements. There are also templates available to record credit card expenses, balance sheets, and basic accounting entries.

One popular option is Excel, which offers well-designed bookkeeping templates to manage basic bookkeeping tasks. These templates are available for free download for both business and personal use.

If you're looking for a free accounting template, a quick online search will yield numerous results. With so many options available, finding the right template to meet your business needs has never been easier.

How to Manage Bookkeeping for a Small Business

Adhering to best practices in bookkeeping is crucial for the success of any small business. To increase the chances of profitability, it's important to follow established rules in bookkeeping.

Managing Bookkeeping

The integration of bookkeeping apps into small business operations has become a necessity in modern times. Online software provides business owners with greater insights into their companies and can be a valuable tool for managing financial information.

Utilizing cloud-based services for bookkeeping has several advantages. Information uploaded to the cloud is safe and secure, accessible from anywhere, and can be shared with your bookkeeper for easy collaboration.

When it comes to accounting software, there are many options available, both paid and free. Take the time to research and compare the various options to find the best fit for your business.

Investing in accounting software is often faster and more cost-effective than relying on a human bookkeeper. The software can help you avoid human error in accounting and provide more accurate financial statements.

It's important to keep records of all payments, both in and out, to accurately track cash flow. Accounting software or templates can be used to manage financial reports and ensure that all transactions are recorded correctly.

When choosing accounting software, it's important to look for basic features such as the ability to manage a balance sheet, perform bookkeeping tasks, record revenue, and assist with tax returns. The software should also provide a chart of accounts and accounting tools to help you track both online and in-person transactions.

What You Need to Know

Many accounting software options for small business owners offer free trials, giving you the opportunity to test the software before committing to a subscription. Take advantage of these trials to determine if the software meets your needs and fits your business style and personal accounting method.

Accounting Software

Once you have selected a software, be sure to utilize its bookkeeping features. Some software automatically handles receipts, while others require manual input. It's important to understand the system's method of handling receipts.

Meeting deadlines is crucial for small businesses, and bookkeeping software can help in this regard. Use your phone or calendar to set reminders for important deadlines, such as sales tax payments, income tax, fees, and shipment costs.

Tracking cash flow is also essential, as it makes tax season much simpler. Having all of your business and personal expenses saved in one place, along with your bank account balance sheet, allows you to easily monitor expenses and profits.

Failure to track financial reports can lead to a lack of understanding about the financial health of your business. Accurate financial records are crucial for making informed decisions and can mean the difference between a profitable quarter and a loss.

Accounts Payable/Receivable

Accounts Payable (AP) refers to the money that your business owes to vendors in the form of bills and invoices. Keeping track of AP is important to ensure timely payment and avoid duplicating payments.

On the other hand, Accounts Receivable (AR) represents money that is due to your business from customers. If you sell a product or service and don't receive payment immediately, your small business has AR that you need to keep track of.

It's crucial to keep AR up-to-date in order to send timely and accurate bills and invoices. Good bookkeeping practices will help you keep track of AR and ensure that payments are received on time.

In summary, AP represents the money your business owes to vendors, while AR represents the money that is due to your business from customers. Keeping track of both AP and AR is essential for accurate bookkeeping and to avoid paying twice for the same transaction.


A cash account is a central repository for all of your business transactions and is used to track all financial activity. It is a simple and straightforward way to record cash payments, withdrawals, and deposits.

When dealing with cash transactions, it's important to gather bank statements and any other relevant financial information to ensure accurate tracking. This information can help you get a complete picture of your financial activity and make informed decisions.


Inventory management is an important aspect of running a small business. It involves keeping track of all products in stock and ensuring that the numbers in your books match physical counts of the inventory.

There are two ways to track inventory: either by performing periodic physical counts, such as daily, monthly, or yearly, or by tracking inventory whenever a sale is made. Choose the method that best suits the needs of your business.

Accurate inventory tracking is crucial for ensuring the financial health of your business. By keeping track of all products in stock, you can make informed decisions about ordering new products, managing stock levels, and ensuring that your books accurately reflect the physical inventory.


Let’s say you’ve borrowed money. It can be anything from buying equipment like computers, vehicles to help you get from A to B when on the job, or even furniture and other items for your business. These expenses fall under the loans payable account which tracks what you owe and what’s due for you to pay.


The loans payable account is an important aspect of bookkeeping, especially if your small business has taken out loans to finance equipment, vehicles, furniture, or any other expenses. This account tracks the amount you owe and the payments that are due.

Keeping track of loans payable is crucial for managing the financial health of your business. By knowing what you owe and when payments are due, you can plan your cash flow and ensure that you have the funds available to make timely payments.

Payroll Expenses

Employee compensation is often the largest expense for small businesses, making it an important aspect of bookkeeping. Keeping accurate records of employee compensation is essential for meeting tax reporting requirements and avoiding any issues with employees.

Having a chart of accounts for employee compensation can help you keep track of payments, avoid errors, and ensure that all employees are paid on time. This chart should include all relevant information, such as employee names, payment amounts, and dates of payment.

Retained Earnings

The retained earnings account is an important aspect of bookkeeping that tracks the profits that a small business reinvests into the business, rather than distributing to owners or shareholders.

Retained earnings are cumulative, meaning they reflect the total amount of profits that have been reinvested in the business since its inception. Keeping accurate records of retained earnings can provide valuable insight into the growth and financial health of your business.

Thankfully, managing this account is relatively straightforward and many software companies offer free accounting software to help with this task.

The Best Bookkeeping Software for Small Businesses

Receipt Cat – Receipt Cat is a receipt scanner app and expense tracker that helps you keep track of your business receipts and manage your small business expenses. Receipt cat is for freelancers, indie developers, or other sole proprietors who don’t want to manage complex accounting software. Use powerful AI to automate your expenses and turn your receipts into data.

Wave – Wave is a cloud-based accounting software designed specifically for small businesses and freelancers. It offers a range of features to help manage finances, including invoicing, receipt scanning, and expense tracking.

QuickBooks – QuickBooks is a comprehensive accounting software developed by Intuit (think TurboTax) specifically for small businesses and self-employed individuals. It offers a range of features including invoicing, payroll management, expense tracking, and reporting, all aimed at simplifying financial management and providing valuable insights into the health of a business.

Top Bookkeeping Tips

Small businesses need to stay organized with their finances in order to be successful. Here are 5 top bookkeeping tips to help:

  1. Keep Business and Personal Finances Separate - Avoid the confusion and potential financial loss by keeping your personal and business finances separate.
  2. Utilize Bookkeeping Software - Utilizing bookkeeping software helps minimize human error and gives peace of mind.
  3. Plan Your Budget - Knowing your monthly expenses and having a margin of error in your budget can help ensure you always have enough funds to cover your bills.
  4. Choose and Stick to an Accounting Method - Familiarize yourself and your employees with the chosen accounting method to ensure accuracy in your financial records.
  5. Keep it Simple - Utilizing bookkeeping software helps simplify the process and keep your financial records organized.

Determining Whether to Use Digital or Manual Bookkeeping for Your Business

There are a variety of options available for bookkeeping, including both digital and manual methods. In fact, you can choose to utilize both types of bookkeeping depending on your business needs and preferences.

Manual or Automatic bookkeeping

One approach is to use software to manage your basic expenses and transactions, while also manually tracking your business accounting. However, it's important to keep in mind that human error is a common cause of bookkeeping mistakes, accounting for approximately 80-90% of issues.

Alternatively, you may choose to begin with manual bookkeeping for your business accounting and then gradually transition to online software specifically designed for small businesses. This will enable you to access a range of features and tools to help streamline your bookkeeping processes. Ultimately, the decision to use digital or manual bookkeeping methods will depend on your individual business needs and resources.

Utilizing Excel for Small Business Bookkeeping

Excel can be a powerful tool for managing your small business bookkeeping needs. To get started, consider using the free templates provided by Google, which are designed to handle basic business accounting tasks, including sales tax calculations and financial statement creation.

While these templates are a great way to become familiar with using online resources for bookkeeping, it's important to note that they may not provide all of the resources you'll need as your business expands. Therefore, as your business grows, you may want to consider investing in additional bookkeeping resources, such as more advanced Excel templates or specialized bookkeeping software. With the right tools and resources, you can effectively manage your small business finances and ensure that your business is on the path to success.

Considering a Bookkeeping Service for Your Business

Keeping track of business finances can be a challenging task, and if you're struggling to stay on top of your bookkeeping, it may be time to consider enlisting the help of a professional bookkeeping service.

While hiring a bookkeeper can be more expensive, it can also provide a sense of personalized attention and support. However, if cost is a concern, a bookkeeping service may offer a more cost-effective option. These services typically provide accounting software and can assist with organizing bank statements, expenses, accounts, and taxes on an ongoing basis for a set fee. Plus, many bookkeeping services offer 24/7 access to your financial records, giving you the flexibility to manage your business finances on your own schedule.

Ultimately, the decision to use a bookkeeping service will depend on your individual needs and resources. But, by outsourcing your bookkeeping needs, you can free up valuable time and resources to focus on other important aspects of running your business.

Understanding the Cost of Bookkeeping Services for Small Businesses

Bookkeeping is an essential aspect of managing any small business, and it's important to understand the cost associated with these services. The cost of hiring a human bookkeeper will vary depending on the size of your business, the industry you operate in, and the specific financial services you require. Generally, in-house bookkeepers charge between $20-$30 per hour, with variations based on their level of experience.

Outsourced bookkeeping services are another option and typically charge monthly fees starting at $99 per month. This can be a more cost-effective solution for small businesses with basic bookkeeping needs. Additionally, many accounting software providers offer free trials for their basic services, which can be sufficient for managing your bookkeeping needs.

If your business requires more advanced bookkeeping services, software like QuickBooks can be a viable solution. QuickBooks offers a range of packages, with pricing ranging from $30 per month for their simple package to $200 per month for their advanced services. The level of coverage you need will depend on the size and complexity of your business finances.

Ultimately, the cost of bookkeeping services will depend on your business needs and resources. It's important to carefully consider your options and select the solution that best meets your needs while remaining within your budget.


there are many options available for managing your small business bookkeeping needs. When deciding on the best solution for your business, it's important to consider factors such as ease of use, cost, and the specific services you require.

Online bookkeeping services often provide a comprehensive solution that covers all of these criteria. It's important to take the time to research different options and identify which service best meets your unique needs. Consider whether you need assistance with managing cash flow, sales tax, payroll, income, or other financial aspects of your business.

With so many options available, there is a bookkeeping solution that is right for your business. By leveraging the power of technology and professional expertise, you can effectively manage your finances and ensure the success of your small business.

This post is for informational uses only and is not legal, business, or tax advice. Please consult with an attorney, business advisor, or accountant with concepts and ideas referenced in this post. Balance Pro assumes no liability for actions taken in reliance upon the information contained in this article.

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