What Is Bookkeeping and Why You Need It: The Basics

I’m a little bookkeeper, short and stout. Here is my ledger; here is my trusty pencil! A penny for each transaction, that’s the way I like to count it out.

Bookkeeping is an important part of running your business because it gives you insight into what's going on behind the scenes. You might think that all bookkeepers are accountants or have some sort of accounting background, but they don't necessarily need any formal training in numbers at all!

If you want to learn more about basic bookkeeping practices, keep reading below.

The first step in bookkeeping is to create a chart of accounts. This is a list of all the different types of income and expenses your business has. It can be as simple or complex as you want, but it's important to include everything so you have a complete overview of your finances. Your chart of accounts should reflect the industry that your business is operating in. Take a look at our balance sheet example balance sheet for a quick reference.

Next, you need to track each and every transaction that happens in your business. This might seem like a lot of work, but there are plenty of helpful tools out there to make it easier. There are online bookkeeping programs, apps, and even cloud-based systems that can make tracking your transactions a breeze. I have linked a few of my favorites below.

Once you've tracked all your transactions, it's time to do some basic math! Add up your income and subtract your expenses to see how much profit (or loss) your business made. This is the basic overview of your financial status, and it's a good idea to check in on it regularly.

If you're feeling overwhelmed by bookkeeping, don't worry - there are plenty of resources out there to help you get started. And if you need more help down the road, don't hesitate to reach out to an accountant or other professional for assistance. I of course recommend CLE Bookkeeping Solutions. You can always reach us using the form provided on our website or give us a call at 620-670-4501

Bookkeeping might seem like a daunting task, but with a little bit of practice, it can become second nature. Just remember to take things one step at a time and before you know it, you'll be a pro!