Let me guess, you didn’t start your small business because you wanted to crunch numbers. And yet, here you are – waist-deep in reconciliations and invoices. And those numbers aren’t about to crunch themselves, are they?

But before you throw your hands in the air and hire an in-house accountant, understand that DIY bookkeeping for small business is possible. You just need to follow the right industry advice.

But First, What Is Bookkeeping?

Numbers are the lifeblood of your business. They should be considered before you make any business decision – big or small. And that’s where bookkeeping comes in.

Bookkeeping is the process of recording and organising your finances. It can help you figure out if your business is profitable, identify opportunities for growth and chart your pathway. Small business bookkeeping includes tasks like invoicing, data entry, account reconciliation and monthly reports. Without bookkeeping, your numbers will have little meaning. And your business may fumble as a result. So now that you know you need solid bookkeeping processes, follow these 7 tips to DIY your small business bookkeeping…

DIY Bookkeeping For Small Business – 7 Expert Tips

1. Organise your bank accounts

If you’re new in the business world, you might be using your personal bank account for everything –
including business transactions. This might work to begin with, but as your business grows it will become confusing and tiresome. Save yourself the stress by setting up a separate business account. This will make tracking your transactions so much easier and create a hassle-free tax time.


2. Choose an accounting software

It’s called bookkeeping for a reason. You see, old school bookkeeping involved handwriting every
single transaction – ugh! Thankfully, nowadays we have a range of savvy software to choose from. Cloud-based software, like Xero, is a popular option for many business owners. This is because details about your income and purchases will transfer straight from your bank account to your books.

The result? You won’t have to spend hours entering these in. If you’re not willing to pay for cloud-based accounting software, create a detailed Excel document or Google spreadsheet. Then, you can manually enter in all financial transactions. While it’s tempting to save a few dollars and go for this option, remember to consider the excess time you’ll spend on bookkeeping (time that may be better spent on your business).


3. Create a chart of accounts

A chart of accounts (or COA) is a breakdown of all your financial transactions. Yep, it’s not talking about multiple different bank accounts, but rather, it’s a list of categories. It’s the table of contents to your business finance guide. The 5 most basic accounts include:

Assets: The items of value that your business owns (such as cash and inventory)
Liabilities: What your business owes (for example a loan)
Equity: The assets minus the liability
Income: What you earn through sales (the lifeblood of your business)
Expenses: Cash going out of your business (such as subscriptions or outsourcing)

Each of these basic accounts is like a chapter in your finance guide, and each chapter has a number identifier. These are the 5 most common account types, although your small business can create your own to better suit your needs. As your business grows, you might find yourself adding more subcategories.


4. Set a time to review your transactions

Review your business transactions on a weekly basis. This will help you keep track of your money and pinpoint any inconsistencies. And by scheduling in time once a week (and sticking to it) – your end-of-month reconciliation will be a lot easier.


5. Keep track of your records

When bookkeeping is done well, you’ll have a system for keeping track of invoices and payments. Set regular reminders, because chasing down overdue invoices can be stressful (both mentally and financially). On the flip side, you also want to keep track of your outgoing payments so you stay on top of your expenses. If you choose to work with cloud-based accounting software, it will be simple to keep track of your records. Alternatively, you can enter it into a Google or Excel spreadsheet.


6. Run financial reports

At the end of each month, it’s important to create a series of financial reports. This will help you interpret your financial health at a glance. So, what reports are important? Several reports are beneficial for small businesses, although the 3 main ones include a balance sheet, an income statement and a cash flow statement.

  • A balance sheet is a summary of all your business assets and liabilities at any given time. It
    can be used to interpret the health of your business.
  • An income statement (or profit & loss) outlines your company’s income and expenses, which will show whether you’re operating on a profit or loss.
  • A cash flow statement shows the flow of cash, into and out of your business, over a period
    of time. The main difference between this and an income statement is that a cash flow statement does not include depreciation.


7. Use your time wisely

As you can see, learning how to do simple bookkeeping for small business is a time-consuming task. Especially if numbers make you want to pull your hair out. But bookkeeping is a vital job if you want to run a healthy, profitable business (who doesn’t, right?) So if you’re spending too much time on your small business finances, it could be time to consider outsourcing to a virtual bookkeeper.

Book a Free 30-Minute Consultation with CFO Babe

At CFO Babe, we’re a boutique finance hub. We blend bookkeeping, accounting, consulting and community. We’ll work with you to streamline your numbers so you can kick your business goals. And the best part? You can call upon us only when you need it, meaning we’ll be a fraction of the cost of hiring an in-house accountant.

Book in a free 30-minute consultation, where we’ll talk about your finances, directions and
opportunities for growth.

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