Managing businesses’ books can seem impossible; some arduous steps and rules seem counterintuitive and seem to slow down the business flow. However, it does not need to be that way. To run a successful business, you need to know these fundamental bookkeeping processes.

1. Organize Source Documents

Source documents are the beginning of what entails bookkeeping. Source documents are the items (invoices, bills, receipts) for which the ledger is organized.

There is a multitude of ways to organize source documents. Most opt to organize chronologically, and by the bank account the purchase/payment was made through. Others, however, choose to eliminate manual data entry and upload their bank statements to bookkeeping software.

2. Make Journal Entries

The chief job of a bookkeeper is to track and organize all transactions and have a quick reference point with more details. The primary tool for this is keeping a journal. You’ll want to follow a few specific transactions.

First and foremost, you’ll want to clear up transfers between accounts. This limits the chances of counting income or expenses more than once, potentially corrupting your bookkeeping. When you identify one side of a money transfer between accounts, you should automatically denote the change in the paired account as well.

Similarly, if someone transferred money from a personal account into a business account (as the owner, CEO, etc.), this should be noted as an owner investment.

Secondly, and more familiarly, a bookkeeper will want to classify revenue and expenses. This bread and butter type of bookkeeping is simple but often requires the most work and has the most considerable error consequences.

Keeping a journal organized can require a lot of work and can require significant resources. Luckily there are professional bookkeepers that can allow you to focus your efforts elsewhere.

3. Determine Financial Effects

As a bookkeeper, it is crucial to know the business books and know the effects that any transaction might have on the company as a whole. Ensure that as you organize and prep your books, you understand the impact that each transaction has on the company.

4. Handle End-of-Period Procedures

A central bookkeeping process is handling the end of the month, year, and payroll year procedures. The different time frame often requires different amounts of work.

For month-end procedures, it is mostly reconciliation between accounts, both internal and external. Creditor’s balances need to be checked against statements, bank statements need to be checked against the bank account, and customer balances need to be verified. Organizing all this information and ridding yourself of unnecessary data is vital so that end of year procedures can move smoothly.

Year-end procedures include any adjustments to your company that need to be made to agree with the accountant’s final records. This should include an inventory count and evaluation. Once again, purge information deemed unnecessary at the end of this process to allow for easier work next year.

Finally, manage the end-of-payroll year. Similar to year-end procedures, this ensures that all paychecks are paid and that payroll reports and forms are completed.

5. Review & Analyze

An imperative bookkeeping service that often gets overlooked is the ability to provide analysis of documents. This can vary from reviewing profit and loss statements to identifying areas for improvement in spending.

Investing in a talented bookkeeper can provide information and assets that may improve your companies earnings year over year.

Wrapping Up Our Guide to Bookkeeping Processes

Bookkeeping is a vital member of any business team, large or small. The organization and evaluation they provide are second to none, and proper bookkeeping processes can serve as a large stepping stone towards success.

For more information about how bookkeeping services might benefit your company, contact us today.