In this article on the components of a small business bookkeeping system, I will be giving tips on what small business owners will need to do in order to significantly reduce the fees paid to finance professionals that come in at year end to prepare the financial statements for the business.
As a small business owner, you save a lot of money and time if you could learn to organise your stuff all by yourself. Your small business accountant or bookkeeper will charge you less if they have to do small amount of work on your books.
Imagine the number of hours it will take your bookkeeper to collate, sort and record your daily transactions if you hand him or her a bag full of pieces of invoices. You will agree with me that your accountant will charge you extra to cover for the amount of time needed to start off with the preparation of the final accounts.
The aim of this article is to help you identify those simple actions that will help make your life a lot easier as an entrepreneur.
4 components of a small business accounting system
I will provide brief explanation of the components below. Note that the explanations provided are not all that you need to know regarding the components of a small business bookkeeping system.
- Cash book: as the name indicates, this is the book that holds all the cash that comes in and goes out of the business. You can use a simple Microsoft excel spreadsheet to maintain this form of book. The benefit of this is that our bookkeeper or accountant will only need to copy and paste this into any accounting software of their choice.
- Sales invoices file: this book holds the record of all your sale invoices. Try to create a sub file within this file to clearly distinguish the invoices that have been paid and those that are still to be paid.
- Purchase invoice file: this is just the opposite of the sales invoices file where you keep track of all your expenses obligations and strike off any item that is paid off.
- Petty cashbook: a petty cashbook is where you record the little day to day running expenses that are too small to go into the main cashbook. This is called an imprest system in accounting lingo.
- Asset register: an asset is a document that neatly captures details of all tangible assets that is owned by an entity. Having a fixed asset register in place as a small business will greatly assist not just the person coming at year end to do your books but will also help you monitor and manage your assets.
Your life as a small business owner will be a lot easier if you can follow the tips given in this article. Remember that this does not have to be sophisticated. Just a little planning and organization is all that you need to make this process work great wonders for you.
Amy Saunders says
OMG! I found it really intriguing when you mentioned that daily record of small expenses should be included in our bookkeeping system. My friend and I are planning to set up a café in our neighborhood and we are aware of the many procedures needed for that to happen. I will definitely consider hiring such services to help us out with our business soon.