Bookkeeping 101 Class is now in session…
Oftentimes I hear from people that they don’t know what bookkeeping is or why they need it. There’s no shame in being confused by it, but I promise it’s not hard to understand. Welcome to Bookkeeping 101, with me, your friendly neighborhood number nerd!
In this blog post, I am going through what bookkeeping is, why you need it, common misconceptions people have around it and why having solid bookkeeping systems in place gives you a clear understanding of your business.
So let’s dig in.
What is bookkeeping and why do you need it as a small business owner?
Simply put, bookkeeping is the daily recording of your financial transactions. Money in, and money out.
Basically, bookkeeping gives you a snapshot of your business so you can see the financial health of your business. Sound easier than you originally thought? I thought so.
And why do you need to do your books?
Well…you need to know your financial situation so you’re making smart, informed decisions that will benefit your business. You wouldn’t go out and buy a house without going to the bank, knowing how much you can afford and making sure your dollar ducks are in a row before throwing down your down payment.
Your business needs that same kind of attention to the numbers so you don’t make choices that you might not be able to afford.
At the end of the day, when you understand your bookkeeping, you will know how much you can afford to pay yourself, how much to save for things like taxes and other expenses and what parts of the business your money is coming from. All pretty important things to know as a business owner, if you ask me.
What are the essential elements of Bookkeeping 101?
I have to laugh sometimes when I think about this question because it really is so simple. It is recording your money that is coming in and your money that is going out.
That’s it. One sentence sums it up and yet people overthink it constantly. Once you understand that basic concept you can start to take it further and analyze your revenue streams and where you are spending money to operate your company…but in a nutshell, it is money in and money out.
Time for some myth-busting…
There are lots of myths and misconceptions about bookkeeping that float around the business world like…
- Bookkeeping is hard and totally overwhelming (false)
- Setting up bookkeeping systems that are easy to use is a ton of work and damn near impossible (also false)
- I am not a math or numbers person so I literally can’t do this (also a big fat nope on that one)
Most people don’t understand that they are already doing the majority of their bookkeeping….doing things like recording income and expenses and keeping track of receipts.
The thing that leads to these misconceptions is overthinking. People get caught up in the worry of doing everything perfectly and get stressed out by thinking things are harder than they need to be. I love it when I work with clients and they have that lightbulb ah-ha moment where they realize bookkeeping REALLY is as simple as I tell them.
So in closing…
Bookkeeping. Is. Achievable.
Don’t overthink it. You are a successful business owner, you have the smarts to handle the books. Chances are you’re already doing a ton of your bookkeeping work yourself and not even realizing it.
But whether you’re making $10 grand a year or $10 million a year, if you don’t know your numbers you are not making the money you deserve and leaving cash on the table.
If you’re feeling like you need some help figuring them out then that’s ok! I’ve got this great academy called the Number Nerd Bookkeeping Academy.
When you sign up, you’ll learn how to…
- Stay caught up on your bookkeeping each month with solid systems and workflows
- Understand where your money is coming from and where it’s going—and use that knowledge to make empowered business decisions
- Feel confident handling bookkeeping on your own
And tons more.
You can learn more about joining it here.
I hope you enjoyed this post, thanks so much for reading!