Small business bookkeeping – Here's how

Anna Stubbs • March 19, 2024

While software has replaced the leather-bound ledgers of the past, bookkeeping is still an essential task for modern business owners.

Here’s how it works – and why it’s so important.

Bookkeeping benefits

Accurate, up-to-date financial records are vital for running a small business. They let you keep tabs on spending, help you plan and budget, avoid cash-flow issues and identify payment issues that could be costing you money.

Even more important, well-kept books are a must when it comes to completing accurate tax returns and working with lenders.


Bookkeeping basics

  1. Recording means keeping a record of every incoming and outgoing transaction.
  2. Reconciling involves checking transaction data against bank statements to make sure everything matches up. This helps you identify errors or late payments – or in some cases, fraudulent activity.


Bookkeeping in a small business also includes accounts receivable, accounts payable and payroll – that is, sending outgoing invoices, paying incoming bills and paying staff.


Simplifying bookkeeping with software


In the past, business owners recorded sales in a ledger, kept paper receipts for business purchases, and cross-referenced bank statements by hand.


Now, accounting software can take on many of those tasks.

  • Recording sales: information flows straight from a point-of-sale or invoicing system into accounting software.
  • Tracking purchases: business purchase data can be automatically recorded.
  • Reconciliation: is quicker and more accurate.
  • Invoicing and bill payments: can be automated.


Need help getting your books under control? Get expert bookkeeping support from our accounting team, now.

The Man on the Moon Principle

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In 1961, President John F Kennedy famously announced his goal of landing a man on the moon and returning him safely to Earth before the decade was out. As we know, in July 1969, Neil Armstrong and Buzz Aldrin became the first people to walk on the moon, and were brought back to Earth safely, achieving JFK’s goal.  At a time when most people hadn’t even been on an aeroplane, landing on the moon would’ve felt unachievable and overwhelming. However, such a massive goal united people with a purpose; the story goes that even a cleaner mopping the floor at the space station said his job was to help put a man on the moon. So, how did they make the goal achievable? They broke it down into milestones, with each one taking them closer and closer to achieving their ultimate goal. The first milestone was to achieve lift off. So, they set about resolving this challenge. The next milestone was to reach orbit, so they had a team working on this milestone. Then, they had to reach the moon’s atmosphere, land safely on the moon, take off from the moon, enter Earth’s atmosphere and land safely back down to Earth. You can see how breaking the goal down into milestones gave everyone a more achievable objective to focus on which was less overwhelming. Those milestones were then broken down into the actions which needed to be completed. Each action was essentially a small step towards reaching the ultimate goal.

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