4 common bookkeeping options
- The Shoebox Approach: A business owner will keep all receipts for money spent and money received in a folder or box. The papers will then be given to a bookkeeper or an accountant at year-end for tax purposes.
Works best for: Business owners who can’t spare the time to organize receipts and enter data into a system. This method works for a business that doesn’t have many transactions throughout the year. - Spreadsheet /DIY Approach: The business owner organizes receipts and enters data into a spreadsheet or some other tracking system on a computer. The spreadsheet or document is then sent to an accountant for tax purposes at year-end.
Works best for: Small business owners, or individual freelancers who have a small number of transactions. As long as the spreadsheet and receipts are well-organized, an accountant will be able to provide them with the necessary analysis and financial documents. - Bookkeeping Software / DIY Approach: The business owner performs all record keeping using bookkeeping software (desktop, or cloud-based application). Once completed, an accountant will request that the business owner run the reports from the desktop software or that they be given a login for the cloud-based software to view the books as required.
Works best for: Small business owners and active businesses (i.e. those that have five or more transactions per month) and require payroll services. - Outsourced Approach: The bookkeeping is outsourced to a professional. Most professionals will opt for a cloud-based application, which allows both the business owner and the professional to access the books.
Works best for: Active businesses that deal with many transactions and payroll.
In order to get the most benefit from bookkeeping software, it is advisable to have a professional perform the initial set-up, configuration and entry of beginning balances. Cloud bookkeeping software will allow for you to invite accountants to prepare tax filing or financial statements for the business.
When is the right time to use the Outsourced Approach? There is no right answer. It comes down to time and value. Bookkeeping is a must - as a business owner you must decide the value of your time and money.
Created by Novus Accounting & MoneySherpa
