You can apply for a business credit card using your personal credit score and income; business credit is not a requirement. If you’re considering a business credit card, you might want to look for one that offers a generous rewards program and/or charges no annual fee. Having a business plan to start a bookkeeping business isn’t a requirement, but creating one can help you get some clarity on what your goals are and how you plan to proceed with growing the business.
Bookkeeping allows you to have a greater understanding of the areas within your business where you can trim costs. As a business owner, you’re responsible for reporting crucial financial data about your firm to potential investors and other stakeholders. Bookkeeping programs that incorporate graphs, charts, and other visual aids make it easier to increase data precision and improve communication when you’re wooing investors.
Accounts payable
And sometimes it can be produced to include comparisons against the prior year’s same period or the prior year’s year-to-period data. Bookkeeping is different from accounting in that it is the critical first step in tracking bookkeeping for small business all business activities. While bookkeeping provides oversight into each individual transaction (in order to catch discrepancies and correct mistakes), accounting provides a thorough analysis of these numbers.
Clients who are happy with your services are more likely to stay loyal and continue to hire you. They also may be willing to refer you to people they know who might need a good bookkeeper. The exact requirements for starting a small business will depend on the state in which you live. You may need to contact your secretary of state or department of revenue for more information on what paperwork you may need to complete to legally establish your bookkeeping business. Small Business Trends is an award-winning online publication for small business owners, entrepreneurs and the people who interact with them.
Evaluate performance & plan for the future
As illustrated above, between the two basic methods of accounting (cash or accrual), you can best account for prepaid expenses using the accrual method. After you have sold goods or provided a service, you invoice the purchaser. Once the invoice has been presented, the amount of the sale is now owed to you. This is money that you’re due to receive, hence its placement in your general ledger under Accounts Receivable. Tracking purchasers who have paid against those who haven’t illustrate your company’s accounts receivable turnover ratio. While accounting encompasses these data-gathering duties, this field also tends to involve analyzing the numbers and making profit and loss projections.
At the end of every pay period, the bookkeeper will accumulate employee payroll details that include hours worked and rates. From there, the total pay is determined with the applicable taxes and withholdings. In the accounting software, the primary journal entry for total payroll is a debit to the compensation account and credits cash. Generally speaking, bookkeepers help collect and organize data and may have certain certifications to do so for your business. On the other hand, accountants are generally equipped with an accounting degree and may even be state-certified CPAs.