2022 Field Service Business Owner’s Guide to Bookkeeping
June 8th, 2022
Bookkeeping helps businesses make better financial decisions, manage expenses, and generate more profits. It offers reliable accounting input data that sets the foundation of an accounting system. Let's guide you on what is bookkeeping and a few simple steps to start your bookkeeping system today.
What is Bookkeeping?
Bookkeeping is the process of recording all financial transactions of a business. These transactions are then recorded in an accounting system and updated regularly. Bookkeepers are responsible for creating, maintaining, and updating the financial records of a business. Bookkeeping is the foundation of the financial system of a business. An accounting system then uses these basic bookkeeping records to set up the accounting function.
Understanding the Bookkeeping Basics
If you are just beginning as a field service business owner, you’ll need to grasp the basics of bookkeeping first.
Every financial transaction recorded in the bookkeeping system will be categorized under an accounting category. The broader accounting categories for financial transactions include: • Income
As you expand the bookkeeping system, you’ll come across sub-categories of these general transaction categories.
Chart of Accounts
Bookkeeping requires creating journal entries. A general journal is the basic “book” of recording a transaction. Each type of transaction will be recorded under a specific account type. These accounts create the “chart of accounts” for your general journal.
There are three widely used financial statements for a business.
• Balance sheet
• Income Statement
• Statement of Cash flow
Large businesses also create the statement of equity separately. These financial statements show the summarized and reconciled form of the chart of accounts created in the general ledger. Financial statements are audited by internal and external auditors to ensure accuracy. Steps to Field Service Business Bookkeeping Setup Creating a strong financial setup is essential for your field service business’s long-term success. Here are a few simple steps for you to get things going the right way.
Separate Personal and Business Accounts
Separate your personal and business bank accounts even if your entity type does not require it. It will help you create clean financial records for your field service business. Also, it will enable you to minimize personal liability against the business. You'll be able to create bookkeeping records accurately and without complicating the financial system of your business.
Choose the Right Type of Bookkeeping System
Some small business owners make the mistake of choosing the single-entry bookkeeping system. They do it for simplicity and time-saving. However, a single-entry bookkeeping system does not offer an accurate system. Therefore, choose and implement the double-entry bookkeeping immediately. It follows the basic rule of matching entries where every transaction has at least two corresponding entries in the books.
Choose the Right Accounting Method
You can choose between cash and accrual accounting methods for your small business. Most small business owners prefer cash accounting for its simplicity. It is a legitimate practice and can help you in the beginning. Accrual accounting complies with the GAAP rules and offers a comprehensive approach to accounting setups for all types of businesses.
Start Recording Transactions
Once you are done with the planning, it’s time to start recording financial transactions in your books. The key point at this stage is to record transactions under their relevant categories. It will set up your chart of accounts and the general ledger.
Closing the Books
Journal entries are then moved to the general ledger. It shows all entries under a specific account in one place. Ledger accounts are then reconciled and entries are summarized. This process is called the closing of account books. It can be performed daily, weekly, or monthly. The reconciled account balances are then moved to the financial statements under their respective headings.
Field Service Business Bookkeeping – Manual v Spreadsheets v Bookkeeping Software
Field service businesses can maintain bookkeeping records manually using the old paper method. It is a time-consuming and inaccurate method of bookkeeping. Many small businesses use spreadsheets for cheaper costs. However, it is again a time-consuming method and requires continuous reconciliation for accuracy. Using bookkeeping software offers a balanced approach to saving costs, efforts, and time. It also ensures your bookkeeping accuracy as you do not need to manually categorize and summarize financial transactions. It's your turn to take control of your field service business’s financials. By following our guide and tips mentioned in this blog you can set a strong foundation for your business’s financial system.