While owning, operating, and overseeing a small business can be challenging in many aspects, financial management is often uniquely complex. Despite how a basic understanding of financial management and bookkeeping may bring an entrepreneur through the first stages of business development, over time you will need a more comprehensive understanding. Are you looking for a streamlined and effective method in recording business sales and expenses? Below, we provide a three-step overview regarding how to record daily sales and expenses for your business.
How to Record Daily Sales and Expenses for Your Business
Regardless if you tackle this responsibility independently or hire another employee to do so, bookkeepers are responsible for regularly “balancing” the books. This means that account debits and credits should match. If so, your books are then considered “balanced.” However, if these numbers do not match, you must review past documentation to detect any inconsistencies, miscalculations, or other errors, and complete the process again.
Step 1: Determine Whether You Need to Report Cash Basis or Accrual
Businesses use two primary methods to document revenue and expenses and report to the IRS: cash basis or accrual. Depending on the proper method for your company, every other bookkeeping task is affected. Thus, selecting the proper type of accounting immediately is important.
The cash basis reporting method can be utilized for small business that do not stock inventory items and have acquired less than $25 million within the past three years. If your company does not fall into this category, you must utilize accrual basis reporting.
Step 2: Create Three Documents
The next step to accomplishing bookkeeping tasks for your business is by creating the following documents: the balance sheet, the profit and loss statement, and the cash flow statement. Be sure to avoid common bookkeeping mistakes by always keeping these three statements current and accurate.
For beginners in the bookkeeping department, free document templates (made available online) should suffice temporarily until you create customized templates that specifically cater to your business needs and information.
#1. Balance Sheet
The balance sheet helps determine the value of your business by calculating its true worth. The balance sheet documents assets, liabilities, and equity in your company’s name.
It is crucial that you remain careful in keeping a record of each item. At the end of each week or month (whichever schedule you set for your business), update the sheet with any assets, liabilities and equity accrued or lost.
Reviewing your balance sheet at the close of each month and comparing it to the previous month offers insight into how you manage your assets and liabilities. While doing so, search for any abnormal changes and investigate if anything notably increased or decreased.
For example, if your accounts receivable appears higher than normal, assess the explanation. Is it a result of increased sales that month, or have your clients been slower in remitting payment?
#2. Profit and Loss Statement
Also referred to as the income statement, a profit and loss statement helps determine the overall profitability of your business. The profit is calculated by subtracting expenses from revenue for a specific period. Businesses often create quarterly and yearly profit-loss statements.
Updating and reviewing your profit and loss statement at the close of each month reveals what your business earned and spent. After doing such, compare the results of this month to other months in addition to year-to-date. If you prepare an annual budget for your business, compare the statement against your budget.
#3. Cash Flow Statement
The cash flow statement documents where your business’s cash goes. This statement helps business owners understand how much cash the company makes daily, how much cash is owned in purchased assets, and how much cash is invested in the business – including business loans.
As a small business owner, it is important to understand your cash flow goals. If you have yet to establish any, consider creating weekly, monthly, and annual cash flow projections. Then, monitor it weekly and adjust where necessary to keep the goal tangible. As a result, you can maintain an immediate and holistic view of your cash flow goals.
For seasonal businesses, this step is especially crucial. By reviewing your forecasted cash flow for the month, quarter, or even the year, you can prepare ahead of time for the months in which activity decreases. As a result, your business will plan to save the excess earnings from busier months during the height of your business to offset any financial shortcomings of your off-season. Failing to do so could cause a great rift in your finances.
Step 3: Save All Bookkeeping Documentation
To prevent errors or inconsistency, record all financial transactions weekly and balance your books every month to three months. Regardless of the precise schedule you choose, setting a routine that works best for you will help incorporate important bookkeeping duties into the completion of other business management tasks.
Generally, bookkeepers should save every important business document from the beginning of company development. If you are ever unsure of saving a specific document, scan it to create a digital copy and store it in a safe and organized online bookkeeping database. Excessive documentation is better than missing an important record during tax time.
A few of the most important documents to save include:
- Payroll documentation
- Sales receipts
- Tax returns
- Deposit slips
- 1099 forms
- Canceled checks
- Credit card statement
- Bank statements
- Client payments
- Client invoices
Record Daily Sales and Expenses with MyRQB
The key to business success is to focus on what you do best and delegate the rest. By outsourcing your bookkeeping and accounting tasks, your business can receive important and accurate financial reports in a timely manner.
We are the associates you have been looking for. At MyRQB, we are dedicated to helping you obtain the necessary information to make effective business and revenue decisions, especially during the COVID-19 outbreak.
Our team of specialists provides cost-effective, efficient, and accurate bookkeeping services for small businesses and franchises throughout the United States. Furthermore, we take care of all the back-end work and provide you with instant access to financial statements so you can always know where your business stands.
We partner with countless industries, servicing fourteen franchise brands including UPS Stores, US Lawns, Shelf Genie, Elements Massage, and Edible Arrangements to name a few.
Are you still wondering how to record daily sales and expenses for your business? Contact us today at (866) 567-4258 or via our online contact form with any questions or to learn more about our services!