BOOKKEEPING BASICS: 7 Steps to Get You Started

Step-by-Step Tutorial: Getting Started with Bookkeeping

Step 1: Separate Business and Personal Transactions

• Go through all your bank statements and separate your business transactions from personal ones.
• Ensure accurate record-keeping by keeping business transactions distinct.

Step 2: Choose a Bookkeeping System

• Decide on a bookkeeping system that suits your needs: spreadsheets like Excel or Google Sheets, accounting software like QuickBooks, Xero, or Freshbooks, or outsourcing to a professional bookkeeping company.
• Consider the complexity, cost, and level of automation each option offers.

Step 3: Understand Single-Entry vs. Double-Entry Bookkeeping

• Single-entry bookkeeping records each transaction once and is simpler but may oversimplify your finances.
• Double-entry bookkeeping records two opposite entries for every transaction, providing a more comprehensive financial picture.
• Choose a method that aligns with your business needs and consider using accounting software or hiring a bookkeeper for assistance.

Step 4: Choose Between Cash and Accrual Method

• In the cash method, record revenue and expenses when cash changes hands, suitable for small businesses.
• The accrual method matches revenue to related expenses, offering a detailed financial position but requiring more maintenance.

Step 5: Record Transactions

• Enter your business transactions into your chosen bookkeeping system regularly, whether daily, weekly, or monthly.
• Include essential details like the seller or purchaser, document number, date, description, and amount for each transaction.

Step 6: Sort Transactions into Accounts

• Categorize transactions into appropriate accounts based on their nature, such as revenue, expenses, assets, etc.
• Create a Chart of Accounts to organize all your accounts systematically.

Step 7: Securely Store Source Documents

• Keep physical or digital copies of invoices and other source documents in a well-referenced system.
• Maintain compliance by securely storing all necessary documents to support your transactions.

Additional Tips:

• Check with tax authorities to understand your tax obligations and set aside funds regularly for taxes.
• Perform regular bank reconciliations to ensure your bookkeeping records match your bank statements accurately.

By following these steps, you can establish a solid foundation for your bookkeeping practices and effectively manage your business finances.