What Is Bookkeeping?
Quick Answer
Bookkeeping is simply keeping track of the money coming into and going out of your business. It includes recording what you earn, what you spend, and making sure your financial records match what actually happened in your bank and credit card accounts.
Good bookkeeping helps you know where your business stands instead of guessing based on what’s currently in the bank. AZ Easy CPA provides bookkeeping and CPA services in Chandler, Arizona and beyond.
What Is Included in Bookkeeping?
Every business has money moving in and out. Customers pay you, bills need to be paid, supplies are purchased, credit cards are used, and other expenses come up throughout the month. Bookkeeping is how all of that activity gets recorded and organized.
Bookkeeping may include:
- Keeping track of money coming into the business
- Recording business expenses
- Putting expenses into the right categories
- Keeping QuickBooks organized
- Checking bank accounts against your records
- Checking business credit card accounts
- Finding missing or incorrect transactions
- Fixing common bookkeeping mistakes
- Creating basic financial reports
You may hear a bookkeeper or CPA use terms such as “categorizing” and “reconciling.” Categorizing simply means putting a transaction in the right place, such as advertising, office supplies, or utilities. Reconciling means checking your bookkeeping records against your actual bank or credit card statement to make sure they match.
How Does Bookkeeping Work?
Bookkeeping starts with the financial activity happening in your business. Each time money comes in or goes out, there is a transaction that needs to be recorded.
Many small businesses use QuickBooks to help with this. QuickBooks can connect to your bank and credit card accounts and automatically bring transactions into the system. Someone still needs to review those transactions and make sure they’re recorded correctly.
For example, QuickBooks may see that you spent $200 at a particular business, but it may not know exactly what you purchased or why. That information matters because it affects how the expense appears in your financial records.
Once transactions are organized, the accounts are checked to make sure everything matches. This gives you cleaner, more useful financial information.
Why Does a Small Business Need Bookkeeping?
A common mistake is assuming that if there’s money in the bank, the business must be doing well. Your bank balance is important, but it doesn’t tell you the entire story.
Bookkeeping helps you see how much money your business brought in, how much you spent, where the money went, and what was left after expenses. It can also help you notice when certain expenses are getting higher or when something doesn’t look right.
Having current books also makes it easier when your CPA needs information about the business because your financial records are already organized.
Can I Do My Own Bookkeeping?
Yes. Many small business owners do their own bookkeeping, especially when they’re first getting started.
As the business grows, there is usually more to keep track of. You may add bank accounts, credit cards, subscriptions, employees, equipment payments, loans, or other expenses. What once took a few minutes can eventually become hours of work every month.
If you’re comfortable with QuickBooks and consistently keep your records current, doing your own bookkeeping may work well. If you’re falling behind, aren’t sure whether things are being recorded correctly, or simply don’t want to spend your time doing it, professional bookkeeping may be helpful.
How Is Bookkeeping Different From What a CPA Does?
Bookkeeping is mainly about keeping your financial records organized and current. A CPA can work with that financial information to provide additional accounting services and guidance.
Think of bookkeeping as keeping the financial pieces of your business in order. Your CPA can then work with accurate information instead of having to first figure out what happened with months of transactions.
Some CPA firms also provide bookkeeping, allowing businesses to have both services handled in one place.
Frequently Asked Questions
Is bookkeeping just keeping track of expenses?
No. Expenses are an important part of bookkeeping, but bookkeeping also includes tracking income, organizing transactions, checking accounts, maintaining QuickBooks, and keeping your overall financial records current.
How often should bookkeeping be done?
Many small businesses update their bookkeeping monthly. Businesses with a lot of transactions may need it done more often.
Do I need QuickBooks to do bookkeeping?
No, but QuickBooks is commonly used by small businesses and bookkeeping professionals because it helps organize financial information in one place.
What happens if I don’t do my bookkeeping?
Your financial records can become increasingly difficult to understand. You may not know whether your reports are correct, and eventually you may need to go back through months of transactions to get everything caught up.
Can a CPA handle my bookkeeping?
Yes. Some CPA firms provide bookkeeping along with other accounting services, which can make it easier to keep everything organized in one place.
Looking for Bookkeeping or a CPA in Chandler, Arizona?
AZ Easy CPA provides bookkeeping and CPA services in Chandler, Arizona and beyond. Whether your books are already organized, you’ve fallen behind, or you’re simply tired of trying to figure out QuickBooks yourself, reach out to Chris at AZ Easy CPA.
Chris can look at where things stand, answer your questions in plain English, and help you figure out what bookkeeping support makes sense for your business.
