Wasseem Dirani Explains the Basics of Small Business Bookkeeping
One of the hardest things about running a small business is having to do the books. Accounting is one of those nuisance tasks that business owners have to contend with. However, it is a crucial part of modern business, and you need to understand everything about it to be successful.
It is why Wasseem Dirani places so much emphasis on small business owners knowing how to do their bookkeeping. When you know how to do your bookkeeping, you can quickly get a better snapshot of what is happening with your business without needing an accounting degree.
Should You Keep Your Own Books?
When it comes to bookkeeping, the first thing you have to ask is whether you should do your own bookkeeping. It is a consideration that many small business owners have to contend with, but for the majority, it is not a choice they can make. They don’t have the resources to outsource bookkeeping to a professional accountant. That is the main reason why most small business owners choose to do the accounting themselves.
Understanding Business Accounting
There is a reason why accounting is a major profession. It is challenging to do, and it is something that Wasseem Dirani advises you to avoid if you can. Most business owners do not have the needed understanding to manage their books well. They don’t know the ins and outs of bookkeeping, and it will turn into a nightmare for them if they aren’t careful.
The biggest thing you can do is focus your time and effort on understanding how accounting can be outsourced to someone better. Bookkeeping is simply recording and keeping your financial transactions, but it can go beyond that if you know what to do.
Managing Your Cashflow
The big thing that bookkeeping helps to ensure that you understand how your cash business is going. You want to ensure that you’re always cash flow positive, and you can do that by balancing your books and doing things well.
You have to understand the areas where your business can grow and be better. You need to understand how to differentiate assets and liabilities, so you know how to manage your books to be the best they can be. That is something most business owners never get to understand.
Balancing Your Books
When it comes to balancing your books, you have to decide on the bookkeeping method you will use. You have single-entry bookkeeping and a double-entry accounting system. The single entry system will be the best chance you have of success, as it allows you to gauge exactly where you are.
It will also make you a better business owner in the future, as you will get to see which areas your business can improve in. Balancing the books means tallying up everything and making sure that you are doing things correctly. It is reconciling what you have in the books with what you have in your accounts. It ensures that everything is done to a very professional standard, which professional bookkeepers aspire to.
Bookkeeping is also something that requires preparing reports. As a business owner, you should have many reports prepared for your business. It is a great way to help you understand what is going on to make changes better in the future. It will also require a lot of time and effort for you to figure it out.
You should aim to have a profit and loss statement generated occasionally to see how your business is doing. This is something you can showcase to the people that want to learn about your business financials. You should also have a cash flow statement, which will help you understand what is going on.
Filing Your Taxes
Your small business accounting should also help you accurately file your Canadian taxes. The CRA is more likely to audit people with a small business, which means you need to be on the lookout for anything that could be used against you during this process. You have to ruthlessly remove anything that could potentially hurt you, which could create a lot of stress with your accounting situation.
Keeping Your Records
Bookkeeping should also include keeping accurate records for a long time. You never know how far back you will be audited, and you might need to provide documents in the future. By keeping accurate accounts, you will be able to stave off any problem from being audited by the government. It will also help you understand how your business is changing all the time.