Bookkeeping has always been a core part of businesses for maintaining their finances and growing small businesses. The process encompasses different tasks – basic data entry on the software, accounting functions, cash flow and profit and loss statements, balance sheets, etc. This has become the backbone of the financial and accounting system of businesses.
With the development of technology and advancements, accounting has also become automated with the help of online bookkeeping software. But, the bookkeeping process remains the same – tracking, monitoring, implementing, collecting, and reporting the data.
Let’s understand different bookkeeping process points for a better understanding of your business’s financial operations.
For setting up your bookkeeping software you need to connect all your business operations – data, accounts, etc. with the software platform, which helps in easy reconciliation and automated data entry of transactions. Also, the online software solution allows you to store the data safely in cloud space vaults with high-security protection from threats. This way your data remains error-free, and you can easily learn about different ways to streamline your bookkeeping process.
Bookkeeping Entry System Processes
The businesses can choose between two types of bookkeeping entry systems – double-entry or single-entry bookkeeping systems.
The single-entry bookkeeping system allows you to record transactions once, in either the income or expense column. Such a system is suitable for small businesses, which don’t require to process high inventory or equipment transactions in their finance sheets.
Another one is the double-entry bookkeeping system, where transactions are entered twice as both the credit and debit, to balance the books between accounts. This method seems more complicated but prevents errors while recording transactions.
Whichever system is selected by you, it impacts your financial management process and impacts your bookkeeping process in daily operations. Also, you need to decide which type of bookkeeping method you can deploy for your business to function properly without any trouble.
Bookkeeping Process Method
Here you need to decide between the accrual or cash based bookkeeping method.
The cash-based bookkeeping method is used where the transactions involve changing money over hands. It doesn’t record the company’s outstanding bills or invoices until they have been actually paid.
Whereas, the accrual-based bookkeeping method records the bills and invoices without exchanging the funds in reality. Most of the time, an accrual-based method is preferred, but it depends on your business requirements.
Other Bookkeeping Process
This function is a day-to-day bookkeeping process, where the transactions are categorized and imported properly, also the reconciliation of transactions and their recording according to the entry system is done.
Accounts Receivable and Payable Handling
Various small businesses handle accounts receivables, which provides the surety of payments of goods and services exchanged. This process includes the eventual value of finished projects evaluation, invoice preparation and statements provision.
The accounts payables ensure that your business is updated with the bills and invoices that are to be paid on time.
The bookkeeping process of payroll settlement through the bookkeeping software is easy and handy. The software helps in providing complete data on employees for making the final transactions.
Tax filing is another bookkeeping process, which is managed by the automated bookkeeping software that ensures your accounts are divided into different tax brackets according to the transactions and laws in place.
Bookkeeping processes are tricky if managed through accountants, which is why a bookkeeping software makes the process accurate, error-free and handy to operate in the long run. There are different bookkeeping processes which ensures effective bookkeeping practices in your business – entry systems, process methods, transaction management, payroll settlements, inventory management, tax filing, financial statements and reporting of the data to stakeholders on time. With this article, you can easily understand different bookkeeping processes which occur daily in your business transactions.