As a small business owner, keeping track of your finances doesn’t have to be complicated. The easiest bookkeeping method for small businesses is using a simple spreadsheet to record income and expenses. This straightforward cash basis method can save you time and headaches compared to traditional accounting.
Why Use a Spreadsheet?
Spreadsheets are easy to set up, accessible anywhere, and customizable to your business needs. Excel and Google Sheets are popular free options. Compared to manual bookkeeping or complex accounting software, spreadsheets provide a low-cost, user-friendly solution.
With some basic templates and a little training, you can handle your own bookkeeping. This frees up time and money that otherwise goes toward hiring an accountant or bookkeeper. Spreadsheets also make tax preparation easier by keeping everything organized in one place.
The Benefits of Using the Cash Method
Most small businesses can use cash basis accounting, which simply means recording income when received and expenses when paid out. With this method, you don’t have to deal with accounts receivable/payable, inventory tracking, or accruals.
The cash method gives you an accurate picture of your real-time cash flow. Monitoring your income and outflows helps forecast future cash needs and make financial decisions accordingly. It’s also easier to explain cash accounting to lenders if applying for financing.
Setting Up Your Spreadsheet
Start by listing your income sources and expense categories as column headers. Add rows for the months and years. Use the rows to log transaction date, description, amount, etc. Common accounts include:
- Income – sales, services, fees
- Cost of Goods Sold – materials, inventory, packaging
- Expenses – rents, utilities, payroll, supplies
- Assets/Liabilities – loan payments, tax withholdings
Calculate monthly and yearly totals with automatic sums. Link your bank/credit accounts to automatically import transactions. Add separate sheets for accounts receivable, payable, or depreciation if needed.
Stay Organized With Bookkeeping Best Practices
- Enter transactions at least weekly if not daily. Don’t let paperwork pile up.
- Scan or photograph receipts and records. Backup your spreadsheet regularly.
- Reconcile bank statements monthly to match with spreadsheet.
- Separate personal and business expenses. Open a dedicated business account.
- Track invoices due, accounts payable/receivable in a notes column.
- Meet with tax preparer yearly to review. Adjust withholding if needed.
With some routine data entry and reconciliation, a spreadsheet gives small business owners an easy, efficient bookkeeping foundation. The simple cash method approach keeps things clear and focused on cash flow. Just update the spreadsheet, back it up, and get guidance at tax time.
The All-In-One Accounting Spreadsheet Template is your best source for all your bookkeeping needs. Forget building from scratch and get to managing your books quickly.