Choosing the top of the Bookkeeping Basics from so many important, yet very different, accounting activities is a hard task to do. So let me help a little by doing that for you and picking three of the top basic aspects of bookkeeping you should know that will be most helpful for you in your business.
Bookkeeping Basics #1 is to obtain a federal tax identification number which is otherwise known as an EIN, or Employer Identification Number. Even if you don't have or never plan on having employees, you should obtain an EIN.
Why? Quite simply, because it is a smart safety precaution!
This way you can use your EIN for all business matters instead of your individual SSN (Social Security Number), which is something you never want to put in the wrong hands.
You may apply for an Employer Identification Number in various ways, but I recommend online.
This is the quickest and easiest way to go and is a free service offered by the Internal Revenue Service (IRS).
You may also want to check with your state to see if you need a state number or charter.
For Bookkeeping Basics #2, if you haven't done so already, you should always make sure to open separate business checking and savings accounts.
People tend to underestimate how crucial this is to the foundation of their business. But this is definitely one of the important basics of bookkeeping.
Keeping your personal finances and business bookkeeping accounts separate may sound like more of a headache. But believe me; it will actually save you a headache.
When it comes time to gather all of your income tax information at the end of each year, you are going to be very thankful that you had separate bookkeeping accounts from the beginning. Plus, there are very important IRS rules against the "co-mingling of accounts".
I signed up for my business bookkeeping accounts at a different bank than where I do my personal finances banking. Just personal preference, but I like keeping my interests separate from each other. You should do whatever makes you feel most comfortable.
I do recommend that wherever you decide to do your banking, to also sign up for online access to your accounts.
I know many people are reluctant to do online banking, but I find doing my bookkeeping via online banking to be very convenient and safe.
Downloading transactions can save you a lot of time and energy which you can then put toward the things you really enjoy doing with your business!
And lastly with Bookkeeping Basics #3, I highly recommend utilizing an accounting software to help keep track of your business finances. The last thing you want to spend your time doing is writing out your bookkeeping the old fashioned manual way.
There really are a lot of computer software programs to choose from.
I definitely would NOT recommend MS Money for your business bookkeeping. MS Money is great for keeping track of your personal finances, (this is what I use and DO recommend for personal finances) just not for business.
Quicken is only recommended for either personal or small business bookkeeping. It's oversimplified and so not very user friendly for larger business bookkeeping.
There are several different versions that are business specific. Check out the Bookkeeping Supplies Store for a detailed list of the different software available, all at discount prices.
Of course, there are many more than just three important bookkeeping basics. These were just to help get you started.
For anyone who is interested in learning more about what bookkeepers are getting paid, I have put together some valuable bookkeeping salaries information for you too. Along with Bookkeeping Articles, and Bookkeeping News as well.
Please subscribe to my monthly newsletter, Bookkeeping Basics E-zine. It tells you each month about the new information that I have added, including some great tips and advice from myself and other Bookkeeping Basics readers.
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