Which Business Record-Keeping System To Choose?

If you plan to start your own business, one of the first things to consider is how you are going to keep your records. For success of any business, accurate bookkeeping is very important. However, there is no single manner required to keep business records. The only requirement is to produce an accurate accounting picture of income and expenses, whatever the system adopted for your business.

There are two main ways to keep your business records, the manual record keeping and the computerized record keeping.

Manual Record Keeping

The manual system is often the choice of small business ventures. Business owners who have recently opened their businesses find the manual system quite adequate to deal with their bookkeeping and accounting services. There are some like independent contractors and freelancers who find the manual system enough to deal with their accounts in the long run too.

The traditional means of keeping small business records manually are:

Preformatted record books - these can be found at most office stores.

Ledger sheets - these are columnar pads of paper and are also found in office stores.

In either way, one needs to keep a record of every expense, including brief description of the expenses, the amount, to whom it was paid and the date of transaction. One also has to keep similar records on the profit side of any income received.

Pros of Manual Record Keeping

The advantages available through manual systems are:

• Low cost of items used, and
• Ease of use (especially if the expenses and income items are not too many).

Cons of Manual Record Keeping

Using the manual method has the following disadvantages:

The "single entry" system is the mode of input in most of the times, thus each transaction is entered only once. Hence, there is automatic checking as well as balance system done. One has to tally up expenses and income manually by category or by mouth. No doubt, the time taken is more compared to automatic systems.

Computerized Record Keeping

The principles of business record keeping is same with a computer as that in a manual system, only that the process is automatic and the results are much faster and accurate. The need for a set of books is not there if a software program is used. The user only needs to input every transaction into the software program and put it under a category, which could be a descriptive word or a number code.

Advantages of Using a Software Program

There are certain advantages of using software program for bookkeeping purposes. These are:

• instantly see your income and expenses by category
• get profit and loss statements and other financial summaries quickly
• eliminate mathematical errors
• Interface with compatible tax software programs without any need to re-input data.

Disadvantages of Using a Software Program

The disadvantages of using software program for bookkeeping include:

• Using software program is a bit more expensive compared to manual method of record keeping.
• You need to be comfortable using a computer on a regular basis

Keeping Source Documents

Irrespective of how the records are kept, it is important for you to keep the "source" documents. These are the bank statements, receipts, purchase invoices, and other records that are entered into the record-keeping system.

Should You Hire a Bookkeeper?

Most new business owners find it difficult to hire the services of a bookkeeper, at least at start-up time. During this time, business owners would do well to select a system that they are familiar with.

However if it is possible for you to hire a bookkeeper, does it mean that there is no need to learn about the ins and outs of different bookkeeping systems? The answer is a definite no. It is the business owner who is squarely to blame for errors relating to bookkeeping and accounting. Hence, irrespective of hiring a bookkeeper to take care of your business's book on a regular basis, it is important for you to have bookkeeping concepts and also to be aware of the record-keeping practices of your business.

SB Bookkeeping is in the business of providing services of accounting and bookkeeping in Perth different business establishments for many years. Their services have earned them as the Business Bookkeepers in Perth of choice.

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