Maintain compliance with all income, employment, and excise taxes.

Bookkeeping is not enjoyable. Another crucial accounting term, it describes the regular recording, categorization, and reconciliation of transactions. Essentially, bookkeeping prevents you from spending and earning money without keeping track of it.

Bookkeeping is a never-ending task. You should do it every day, but we all know that life gets in the way. To keep an eye on your income, expenses, and overall business performance, you should complete your bookkeeping ideally once per month.

Let’s discuss the two primary bookkeeping techniques before getting into how to do your bookkeeping.

The Cash Method

Revenue and expenses are recognized using the cash method on the day they are received or paid. This method reflects whether or not your money is actually in your account and is the easiest for small businesses to use because it doesn’t require you to track payables or receivables.

Accrual Approach

Whether a transaction is paid or received, revenue and expenses are recorded using the accrual method on the day it occurs. This approach is more frequently used because it more accurately captures a company’s performance over time.

The only thing it doesn’t show is cash flow — a company can appear profitable but have no money in the bank. Over $5 million in annual revenue necessitates the use of the accrual method for business purposes.

Let’s now discuss how you can handle your bookkeeping.

  1. A spreadsheet could be used to keep your own books (like Excel or Google Sheets). This method is ideal for individuals or small businesses with limited resources.
  1. You could hire a freelance bookkeeper or a bookkeeping service to do your bookkeeping. Our free marketplace allows you to post your requirements and have verified professionals reach out to you.
  1. If your budget permits, you could hire a full-time bookkeeper.
  1. Use accounting software; there are numerous free options available.

The tax laws are very complex. Our short blog articles cannot cover in full all the nuances of the rules. Your specific facts may hold various opportunities and possible risks that only trained, experienced, and highly qualified tax specialists can spot. We encourage you to find such help, rather than trying to figure it all out on your own. Consider giving this marketplace a try by posting your project and signing up here.

If you are a licensed tax professional and are interested in helping others either part or full-time, or ad hoc, come on in! Happy to have you. Our marketplace has the full suite of tools to communicate with clients including compliance calendars, task and message management, and billing. You can also quickly connect to knowledgeable colleagues who can complement your services with the ones you do not provide. Register here.