60% of small-business owners feel that they are not very knowledgeable about booking, keeping, and finance.
But if you don’t understand basic bookkeeping techniques, it can be difficult to keep track of your finances and measure your success!
To help, we created this guide to the 5 types of bookkeeping all business owners absolutely need to know. Check it out below:
1. Cash Accounts
If there’s one bookkeeping basic you must know, it’s how to manage your cash account. This is the account where your business transactions (both incoming or outgoing) must pass through.
Bookkeepers usually use two journals to track cash flow: cash receipts and cash disbursements. Receipts are recorded during the period in which they are paid, whilst disbursements are recorded when they are paid for.
The busier your business is, the trickier it can become to monitor your cash flow. Nevertheless, keeping a clear record of both is the best way to monitor your business’s incomings and outgoings.
2. Accounts Receivable
Nowadays it’s common to offer payment terms for products and services that you offer. If you do, it’s essential to keep track of your receivables to ensure you don’t end up out of pocket.
Your receivables account keeps track of outstanding customer payments. You must keep this account organized so that you can send accurate invoices, keep tabs on overdue payments, and provide great customer service to clients settling their balance.
When you’re busy, it’s easy for orders to get lost or slip through the net, but just one missed payment could leave you fronting the cost. A clear account for receivables minimizes this risk.
3. Accounts Payable
Of the types of bookkeeping on this list, your accounts payable is the only account that can save you money, if you are well organized!
This account keeps track of your outgoings and monitors when the money has left your account. You need to keep this account up to date so that you don’t pay anyone twice, or overspend and not have the funds to settle your monthly outgoings.
Being well organized can help you to make early payments which can land you discounts or special offers, depending on your creditor. As 39% of accounts payable professionals reported invoice increases of 10% last year, this is a savings opportunity worth taking advantage of.
Your sales account tracks incoming revenue from sales transactions. This is another booking basic, as recording sales accurately helps you track your business’s growth and make forecasts for the future.
Always aim to record sales transactions promptly to avoid things getting missed. This is even more important during busy periods where your sales volume increases. If you find yourself struggling to keep up to date, outsourced bookkeeping services can provide support.
5. Retained Earnings
Retained Earnings refer to company profits that are reinvested into the business rather than paid out to owners or shareholders. Tracking them can be a great way to see how well your business has performed over time.
Retained earnings are measured cumulatively, so they will be recorded in your account as a running total of the money that has been retained since your company opened for business.
Struggling to Manage the Many Types of Bookkeeping?
As a small business owner, you have a lot on your plate and it can be difficult to manage the different types of bookkeeping. That’s where outsourcing your bookkeeping comes in.
The Accfin Group specializes in providing affordable bookkeeping services to SMEs so that business owners can focus on what matters: running and growing their business. Schedule your free consultation to discover how we can save you time and lower overheads.