Bookkeeping is one of those things that no business can live without. An essential part of your business operations, bookkeeping ensures that you are keeping track of all the financial transactions that you make in relation to your business. Correct financial statements will go a long way for your business, from both an operational standpoint and from a financial one as well. Many people, especially those who are not inclined toward numbers, would shy away from the prospect of keeping lengthy, detailed financial records. All bookkeeping takes is dedication and discipline.
First, you must learn to categorize your expenses and your income statements. Keep two separate files or ledgers - one for money in, and one for money out. You will thank yourself for this when tax time rolls around, especially since there are ramifications when it comes to value added tax. Remember to keep a paper trail - all the receipts you issue and are issued, as well as any other sales invoices. For the money-in ledger, write down all the sources of income you have for your business. Be sure to keep track of all sales or sources of money - be sure to include the date, amount, source of the income, and the name of the customer and, of course, an individual reference number you can assign to this source.
Next, move on to the money-out ledger. In the same fashion as the money-in ledger, assign columns for the person or company that you paid, the sales invoice number that you received, the date of the transaction and the amount. To keep things more detailed, you may also want to include a description of the item or service you have purchased, and a reason why you needed this to further your business. Don't forget to assign a separate reference number for each outgoing transaction as well. Another thing you may want to do is categorize all your expenses according to general types - food stocks, for example, or office supplies, salaries paid, etc. Grouping your expenses this way will also help you out during tax time, so be sure to pay close attention to how you categorize your expenses.
If your business runs with a petty cash fund, be sure to always detail the reasons and transactions that your petty cash goes to. It can be as simple as slipping a piece of paper into the petty cash box, and reviewing these slips of paper at the end of each day or week. The petty cash fund is used to support your business, so use it wisely. Keeping track of what you spend via petty cash also helps you audit what exactly you spend, and you can then decide whether or not it is worthwhile to continue spending money on these things.
At the end of every month, you will want to total your income, expenses and the totals of your petty cash fund. Doing this will not only help you keep track of the cash flow of your business, it will help simplify things when you reconcile all expenditures. That being said, keep a log of the total cash in and cash out at the end of every month. That way, you can track the progress of your business, and you will easily see at which months the money dips and rises, and the reasons why this is so.