What is Bookkeeping? 2025 Business Owner’s Guide

If you bookkeeping choose to use double-entry bookkeeping—and we strongly suggest you do! We’ll show you examples of how to record a transaction as both a credit and debit later on. If you’re like most modern business owners, odds are you didn’t become one so that you could practice professional-level bookkeeping.

Tax Preparation

During this process, a bookkeeper compares your recorded transactions with your bank statements so they can catch and fix any errors. To keep your business prepared for taxes, audits, and future financial planning, bookkeepers organize and store important financial documents — e.g., receipts, bank statements, and invoices. You can earn a Certified Public Bookkeeper (CPB) license through the National Association of Certified Public Bookkeepers (NACPB). The American Institute of Professional Bookkeepers (AIPB) can also help prepare you for the National Certified Bookkeeper (CB) exam by training you in payroll, inventory, error correction, and more. You can earn either certification by passing exams, agreeing to abide by a professional code of conduct, and verifying your bookkeeping and accounting education and experience. While they seem similar at first glance, bookkeeping and accounting are two very different mediums.

• She is a QuickBooks Online ProAdvisor, LivePlan Expert Advisor, FreshBooks Certified Partner and a Mastery Level Certified Profit First Professional.
• Bookkeeping serves as more of a preliminary function through the straightforward recording and organizing of financial information.
• This service lets you maintain control of your books while benefiting from expert support whenever you need it.
• By implementing efficient systems and providing expert advice, we helped them increase their profitability and make data-driven decisions.
• They put together key financial statements like balance sheets, income statements, and cash flow reports, which give you a snapshot of how your business is doing and can help you make better decisions.

The Accrual vs Cash Basis of Accounting

The standards also help protect the shareholders of both public and private companies by ensuring that financial statements provide meaningful valuations and comparisons from one company to another. The data stored in your books can help you better understand your business’s financial position so you can make better financial decisions. Small Business Administration, more than half of new businesses close their doors within five years, and only about one in three will see their 10th birthday. Bookkeeping is essential to the vitality and long-term success of any small business. Primarily, you need to have an accurate picture of all the financial ins and outs of your business. From the cash you have on hand to the debts you owe, understanding the state of your business’s finances means you can make better decisions and plan for the future.

• Bookkeeping is just one facet of doing business and keeping accurate financial records.
• It’s important to note that not all lenders and investors require certified or audited financial statements.
• You’ll save time chasing receipts, protect yourself from costly errors, and gain valuable insights into your business’s potential.
• Good bookkeeping is necessary to have the financial information you need to make sound business decisions.
• There are dozens and dozens of bookkeeping options available and the choices may seem overwhelming.
• Outsourcing the work to a seasoned bookkeeper can allow you to focus on your business plan and growth.

Plan for taxes throughout the year

In these documents, transactions are recorded as a single entry rather than two separate entries. Simply put, business entities rely on accurate and reliable bookkeeping for both internal and external users. Bookkeeping is a crucial function of accounting, and earning a bookkeeping certification is AI in Accounting a great way to show employers your expertise. While a certificate is not a requirement to become a bookkeeper, some professionals pursue certification to show their skills to employers and stand out in their job search. Among other things, you’ll want to gain a firm understanding of accounting principles, get comfortable using popular bookkeeping software, and learn how to work with spreadsheets.

• Because bookkeeping involves the creation of financial reports, you will have access to information that provides accurate indicators of measurable success.
• Now that you’ve balanced your books, you need to take a closer look at what those books mean.
• If you need help setting up your accounting software, Reach out to Gary Mehta, CPA, EA for assistance.
• Accounting is the interpretation and presentation of that financial data, including aspects such as tax returns, auditing and analyzing performance.
• From payroll taxes to managing invoices, efficient bookkeeping smooths out the process of all your business’s financial tasks and keeps you from wasting time tracking down every dollar.

We helped a local restaurant owner in Old Bridge, NJ, streamline their bookkeeping process, identify cost-saving opportunities, and improve their financial forecasting. By implementing efficient systems and providing expert advice, we helped them increase their profitability and make data-driven decisions. Have a professional bookkeeper manage your QuickBooks or other accounting software in Jersey City.

In some cases, bookkeepers can manage payroll services to ensure your employees are paid accurately and on time. Advancing your bookkeeping career to a role in accounting can be advantageous. For instance, the job outlook for accountants and auditors has a 6 percent growth rate from 2023 to 2033 2. The annual median salary for these roles is also higher than for bookkeepers at $79,880. Individuals who are successful bookkeeping professionals are highly organized, can balance ledgers accurately, have an eye for detail and are excellent communicators.

Let us walk you through everything you need to know What is bookkeeping about the basics of bookkeeping. If your bookkeeper bills your customers or pays your vendors and employees, make sure you have proper checks and balances in place to mitigate the possibility of fraud. Our partners cannot pay us to guarantee favorable reviews of their products or services. This guide explains the fundamentals of bookkeeping—with practical tips to help you build an effective bookkeeping strategy for your business. Expand your bookkeeping knowledge by brushing up on the most common bookkeeping errors (and how to avoid them). We provide third-party links as a convenience and for informational purposes only.