Bookkeeping provides businesses a reliable measure of their performance. It gives important information to benchmark the company’s financial status. The bookkeeper’s monthly or annual financial reports serve as one of the basis for the company’s general strategic decisions.
There are different types of bookkeeping systems that a company can adopt in recording business transactions. Knowledge on each type will help you identify which of the two systems is most appropriate for your business.
Double Entry Bookkeeping System
Double entry bookkeeping system is more detailed and complex than the single entry bookkeeping system. It includes records of debit and credit. As its name suggests, it requires double entry for each financial transaction and provides for checks and balances by recording a corresponding credit entry for each debit entry. Simply put, the sum of all debits must be exactly equivalent to the sum of all credits. In this type of system, recorded transactions affect two or more accounts.
Double entry bookkeeping system is the standard method of record keeping. Businesses with complex financial transactions and those that make more than 5 million dollars in gross sales use this type of bookkeeping system.
- Ensures accurate and complete recording of business transactions
- Provides a reliable source of financial information
- Gives fair valuation of the financial health of the company
- Built-in form of error checking
- Easily detects fraud
- Tracks different transactions (revenues, expenses, liabilities, equities and assets)
- Managing a complicated system requires an expert
- May cost more than the single entry data system
Methods of Bookkeeping
Companies can also opt for manual or computerized bookkeeping.
Manual bookkeeping is the traditional, paper-based way of keeping records. This is done by hand, using a journal or a ledger book. Though this method is cheaper and easier to maintain, the recording process is tedious and prone to error.
The computerized method of bookkeeping offers an innovative way of recording business transactions. It is easier, faster, and more convenient. You can use a bookkeeping software to automate reports and analysis, and generate financial statements. Bookkeeping softwares can also efficiently record cash flow with accuracy.
Keep in mind that you still need to follow the principles and concepts of the traditional bookkeeping process in computerized bookkeeping; so you would still need to hire someone who has bookkeeping skills to use the software.
Cloud Bookkeeping Services
Understanding every detail of bookkeeping can be time consuming. If you want a bookkeeper to do this for you, but you don’t want to save on the cost, you can try cloud bookkeeping services. Many small and medium-sized business owners are outsourcing bookkeepers online to get professional help at a lesser price. Virtual bookkeepers use the latest bookkeeping tools to electronically manage your payrolls, sales invoice, expense receipts and other account related services. Outsourcing a bookkeeper is flexible and cost saving. You won’t have to provide your bookkeeper with an office space and supplies. You’re also free from worrying about employee taxes. With an outsourced bookkeeper, managing your books becomes hassle free.
Types of Bookkeeping Services
An outsourced bookkeeper can offer different kinds of services. They can even customize their services based on your budget and needs. Here are some types of bookkeeping services that you can get from an outsourced bookkeeper:
From handling books to filing taxes, an outsourced bookkeeper can make things easy and hassle free for you. Aside from the basic roles of a bookkeeper which includes monitoring your account, handling the accounts receivable and accounts payable, preparing financial statements, planning and analyzing tax requirements and filing taxes, and bank reconciliation, your outsourced bookkeeper can also set up software and data entry for Xero and Cloud bookkeeping and MYOB.
Building and maintaining a proper payroll system can be taxing and time-consuming. You’d have to set time doing payroll days ahead of the scheduled payday to make sure that your employees’ salaries are released on time. Any error and delay in the payroll may upset your employees. Taking this load off you and handing it to an outsourced bookkeeper would save you a lot of time and stress. There are also many laws that protect an employee’s payroll. Violating any of it, consciously or unconsciously, may cause some heavy fines on your end.
Rescue Bookkeeping applies when your accounts are in chaos because you have not kept any financial records for months or even years. There are many reasons why your accounts are out of date and your outsourced bookkeeper can analyze these errors or omissions in the accounts and rectify your financial and business information. Rescue bookkeeping is very complex and is usually tailored to the needs of the business. Sometimes your bookkeeper has to start from scratch with a new file, especially when the old file is already too messy.
ACT Bookkeeping Group is a team of bookkeeping experts that can provide you with the necessary assistance so you can spend less time on worrying about your financial records and more time on overseeing your business operations. We use cloud based software so you can access all the information you need about your business, whenever you want and wherever you are. With ACT, you can get an online real-time data on your cash flow and business performance.
Contact us and book a free consultation today.