Bookkeeping is a necessary part of any business. If you’re just starting out of if you’re finally tackling the behemoth of receipts and are ready to get things organized, you’re in the right place. Through this series, I want to share how bookkeeping works so you’re familiar with the process.
Bookkeeping 101: How Bookkeeping Works
Step 1: A transaction is made
First, a transaction has to happen in your business. If you sell something that is a transaction. If you purchase something that is also a transaction. Ideally, all of these transactions are running through one bank account specifically for your business.
Step 2: categorizing transactions
Every financial transaction you make has to be categorized into an account. The master list of categories is called the chart of accounts. It’s important to keep receipts so you know what you purchased and why you purchased an item.
Your chart of accounts should be customized to your business and fairly detailed. I’ll have an entire blog post on this!
Step 3: Reconcile your bank statement
Once a month you will receive a bank statement either by mail or e-mail. You’ll need to go into your accounting system and make sure that all of the transactions on your bank statement are recorded. You will go to the ‘reconcile’ feature, enter the ending balance and check off each transaction that cleared the bank. Once the difference is $0, you’ll hit reconcile and BAM, you’re done.
That’s the basics of bookkeeping, folks. Making sure that every financial transaction hits your bank account, gets recorded in your accounting system, is categorized correctly and reconciling to verify that everything is there. If you’re doing this each month consistently, you’re on the right track!
Bookkeeping 101 Checklist
If you want a list of tasks to do for your bookkeeping that cover one time set ups to the things you do day to day, I have the list for you! You can purchase the printable below.
Accounting Checklist PDF
Accounting Checklist PDF
A list of one time, annual, monthly, weekly/daily tasks for most small business owners to follow.
If you’re not sure where to start with your bookkeeping, this list is the place to start to make sure you’re covering your bases.
Print this PDF and get to work outsourcing the tasks or checking them off yourself. Your business will thank you!
Be on the lookout for more posts covering your frequently asked bookkeeping questions. In the meantime be sure to follow me on Instagram @lydia.miller.mba.