Many start up business owners have mastered providing excellent services and products and attracting quality customers. But, when it comes to bookkeeping, they are dropping the ball. If you are a business owner and you don’t have a good understanding of the types of accounts used by your bookkeeper to organize your financials, you might not have a success business. Lets take a look at bookkeeping for small business
Inventory
Any unsold products have monetary value, so they must be tracked. You should take inventory periodically to make sure that they physical inventory matches what your computer days. This will help you to catch theft sooner rather than later.
Cash
Every business transaction passes thru this account. You should be reconciling this account each and every month to make sure that all of you transactions are recorded.
Accounts Payable
When accounts payable s managed properly, it keeps your business running smoothly. Paying bills on time reduces the risk of late fees and penalties.
Accounts Receivable
Uncollected money from customers is known as accounts receivable. Keeping on top of this account will keep the cash flowing into your business. Your bookkeeper should be providing you with an aged receivable monthly.
Sales Account
The sales account tracks the revenue from all streams. Sales is crucial to any business, and you should be watching from trends.
Retained Earnings
This account tracks any profit that is reinvested into the company. It is a cumulative number that appears as a running total since the beginning of the company. Lenders will look at the figure on your balance sheet to judge the company’s performance over time.
Owner’s Equity
This account tracks the money that the owner invested into the company.
Purchases
This account is for tracking finished goods and raw materials that are purchased for the business. It is a component of “cost of goods sold.”
Payroll Expenses
Payroll is usually one of the highest costs for most companies. I recommend the use of a good payroll company like Gusto. Payroll laws change frequently and keeping up with all of these changes is difficult. Gusto makes sure that all of your payroll is handled properly, and it integrates easily with Quickbooks Online.
Loans Payable
This account is vital for companies that borrow money to purchase property, vehicles, and other equipment. It helps to track due dates and payment amounts for each loan.
If you have a knowledgeable bookkeeper, you don’t need to know how to manage each of these accounts by yourself. Once you understand these accounts, bookkeeping for small business becomes a little easier to manage.
