While software has replaced the leather-bound ledgers of the past, bookkeeping is still an essential task for modern business owners.

Here’s how it works – and why it’s so important.

Bookkeeping benefits

Accurate, up-to-date financial records are vital for running a small business. They let you keep tabs on spending, help you plan and budget, avoid cash-flow issues and identify payment issues that could be costing you money.

Even more important, well-kept books are a must when it comes to completing accurate tax returns and working with lenders.

Bookkeeping basics

  1. Recording means keeping a record of every incoming and outgoing transaction.
  2. Reconciling involves checking transaction data against bank statements to make sure everything matches up. This helps you identify errors or late payments – or in some cases, fraudulent activity.

Bookkeeping in a small business also includes accounts receivable, accounts payable and payroll – that is, sending outgoing invoices, paying incoming bills and paying staff.

Simplifying bookkeeping with software

In the past, business owners recorded sales in a ledger, kept paper receipts for business purchases, and cross-referenced bank statements by hand.

Now, accounting software can take on many of those tasks.

  • Recording sales: information flows straight from a point-of-sale or invoicing system into accounting software.
  • Tracking purchases: business purchase data can be automatically recorded.
  • Reconciliation: is quicker and more accurate.
  • Invoicing and bill payments: can be automated.

Need help getting your books under control? Get expert bookkeeping support from our accounting team, now.

Check out more from Xero by clicking the link below:

Small Business Guide – Xero