Simplified Book-keeping for Entrepreneurs
Keeping records is helpful for businesses, especially small businesses. It helps you keep track of stocks, goods and other things in your enterprise. Bookkeeping is the art of recording or organizing a business financial transaction. A bookkeeper is someone who keeps record. Keeping an eye on the record of your stock is one major way to discern whether you are making profits or loss in your business. If you are not a math guru, the thought of bookkeeping might scare you, but I advise you calm your nerves. You do not need to understand all the sine and cosine rules of calculus to keep your records; however, a little knowledge of math is encouraged. Bookkeeping is not as hard as it sounds, you do not need a University degree to keep record, I have simplified in this article some basic bookkeeping guides for entrepreneurs. I will try to introduce you to some of the most common and basic concepts.
1. Account: account is a record of all certain types of financial transaction. It does not refer to your bank account or social media accounts instead. There are basically five types of accounts
Asset: cash and resources that a business owns.
Liabilities: they are the duties or loans that the business owes
Revenue and income: these are money generated by the business especially through sales.
Expenditure: this is the money spent by the business in the realization of its service. It could be in form of salaries, taxes etc.
Equity: equity is what remains after assets and liabilities have been subtracted from each other.
Bookkeeping helps you set up an account which encompasses the above so you can record transaction in the appropriate category.
2. Create your account: knowing about bookkeeping is one thing, setting up your account is another thing. You could use the paper format called general ledger or use the computer . Many businesses today use tools like spreadsheet to keep their record, but if you are not a computer freak, you could use general ledger. What matters is keeping record not the media.
3. Choose a method: there are basically two methods of book-keeping; single entry system of bookkeeping and double entry system of bookkeeping. In the single entry, you only get to record a transaction once, while in the double entry, you record transactions twice by creating double columns for transactions. The first column on the left is where you label credit, while the one after it on the right is labeled debit. So whatever is being recorded in the credit column is repeated in the debit column. “A debit doesn’t necessarily mean cash is flowing out; likewise, a credit isn’t necessarily money you’ve earned. The type of account defines whether a transaction either debits or credits that account.” Deciding to choose which one of the two systems to employ depends on you and the growth of your business. If your business is very small and you handle everything and or you don’t receive much cash, you could consider the single entry system. If your business on the other hand is large and there is much flow of cash, it is best to operate the double entry system. And if you are making use of the computer in keeping your record, you’ll have to employ the double entry system.
4. Take record of every financial transaction: once you set up your account, it is important that you take record of every financial transaction. While taking records, be careful not to make mistakes, make sure debits are properly debited and credits properly credited.
5. Balance your account: at the end of the month or year, make a calculation of your accounts and transfer the records into your general ledger. Since you have both credit and debit sides, endeavor to make sure they are both balanced. “For example, if over the course of the month your cash account has had $3,000 in debits (increases) and $5,000 in credits (decreases), you would adjust the cash account balance by a total of $2,000 (as a decrease).” At the end, your accounts, your assets and liabilities should give you equal output, if otherwise, then you might need to go over your calculation again and see if there was an error somewhere or if there was anything you left out.
6. Create financial reports: after balancing your accounts, the next task for you is to prepare a financial report. By summarizing the flow of money in each of the accounts (in your ledger), it will help determine the health of your business. It helps know if you have more revenues than expenditure. Some common financial reports created in bookkeeping include; balance sheet. Balance sheet summarizes your total assets, equity and liability at a particular period of time, and helps you point out whether you are making progress with your business or you need adjustment. Profit and loss statement, cashflow statements are also documents that gives you financial reports in bookkeeping.
7. Have a schedule: endeavor to close your records perhaps every week or on a monthly basis. More so, make sure you attend to your records when your mind is free and you are fresh so you don’t meddle up your account
8. Secure your records: securely store records. You might be in need of the records at any time, so don’t mess them up. You could have your records continually backed up if you have them on your computer, this is to provide you a rescue route in case you lost your records or your computer got stolen or corrupted.
9. Be careful: book keeping could be difficult even for people with accounting degrees. If you are not sure of yourself, employ the service of an accountant who will be willing to help you. In the absence of that, you could use book keeping applications. You do not want to start by messing up your records
10: understand the basics: understanding the basics of bookkeeping will help you keep clean records of your business. It does not matter whether you finally employed help, but the understanding of the basics will guide you while keeping your records.
Hope you enjoy this article?
Share your thoughts in the comment session.
Contact us today for your business consultancy and business advisory services. We can help you fine tune your idea, structure your business, market your business, train your staff, consult on your retirement plan, coach you for financial success. We also write business plan and help with fund raising strategies and Grant applications. We can help you start, grow and expand your business.
Call or WhatsApp us now on 081 0563 6015, 080 7635 9735, 08113205312 or send email to firstname.lastname@example.org and we will solve any of your business problem.
- Katumu Adasi: How to survive in Nigeria without a job - February 11, 2021
- Top 5 business and services with the highest demands in Nigeria - January 4, 2021
- How to Become a Millionaire doing Rice Farming in Nigeria - January 4, 2021