An Overview of Online Bookkeeping services for small businesses Bookkeeping is a transactional and administrative work to manage the recording of daily financial transactions, including sales, purchases, receipts and payment. A bookkeeping service proposes a three-tiered approach to develop and maintain a business’s overall financial processes and management, including: General Accounting and Bookkeeping Preparation of Financial Statement Tax Return Filing Who mandates Bookkeeping Services? In India, every company or firm should abide by the statutory regulatory requirements, including maintaining books of accounts. Section 128 of the Companies Act 2013 mandated every company, including private limited, public limited and one-person companies, to maintain the Company's Books of Accounts accurately. Section 34 of the LLP Act 2008 requires a limited liability partnership to compulsorily maintain proper books of account and statements of account and solvency pertaining to its business operations. Further, section 44AA of the Income Tax Act requires every business to maintain proper books of account if income is more than INR 1,20,000/- or the total sales, turnover or gross receipts is more than INR 10,00,000/- in any one of the three years immediately preceding the previous year. It is mandated to every professional carrying on legal, medical, engineering or architectural profession or the profession of accountancy, technical consultancy, interior decoration or any other profession to maintain books of account to calculate the total income for the purpose of income tax return filing. Our experts stay updated with all the legislative and regulatory changes and ensure they comply. Why Online Bookkeeping Service? Online Bookkeeping by a professional establishes a necessary requirement of effective financial management for every business, irrespective of the industry sector in which it operates. Our Bookkeeping services allow business owners to gain financial insights about their business depending upon information acquired from their bookkeeping data. Bookkeeping flourishes prompt business decision-making A business that is absolute about its accounting compliance needs will have reliable financial information and can make better financial decisions suitably tailored. Our team of experienced professionals deeply understands accounting needs and compliance and provides tailor-made financial decisions. Financial statements help apprehend crucial financial information Major financial statements that are drafted as a part of online bookkeeping services in India are: • Profit and Loss Statement • Balance Sheet • Cash Flow Statement Our professionals analyze the financial statements and make strategic financial decisions. Benefits of Bookkeeping for Small Businesses To keep track of the income and expenditure of the business To ensure smooth functioning and transparency, every individual, firm or corporation must beware of the income earned and expenditure incurred. It assists them to plan and strategize their financial resources and utilize them accordingly. Timely access to operational information The updated records provide access to operational information to the management at any point in time. Business owners or managers are indirectly associated with all transactions. Accounting and bookkeeping help them monitor all the activities from time to time. Regular reconciliation rationalized decisions Reconciliation of monthly or quarterly data helps the management analyze the benefits or adverse aspects of a business. Accounting services come with the benefit of periodical reconciliation of data. Hence, future decisions can be rationalized after analyzing the profit and loss. Ready to furnish data for timely compliance Accounting makes extraction of data easy and timely submission of regular return filing, compliances and scrutiny of any businesses. Why Online Bookkeeping Service for small businesses? To record the transactions The very first objective of bookkeeping is to maintain accurate and complete records of all financial transactions in an orderly manner. It records all transactions systematically and ensures all financial transactions are mentioned in the books of accounts. These transactions are required for future reference. To show the correct position Bookkeeping helps to determine the overall impact of a company's financial transactions. It shows the financial effect of all business transactions that have taken place in a financial year. The financial information is provided to the shareholders and management of the company, thereby helping them formulate future policies and plans. To detect errors and fraud Bookkeeping helps identify the transactions and summarises them chronologically and systematically. Bookkeeping makes sure that the books of accounts are accurate, up-to-date, chronological and complete. This helps in detecting any errors or frauds in the business. Inefficient bookkeeping departments can result in unnecessary legal implications A business owner's job is not to chase accounts and face compliance mistakes. The business owner should focus on the core area of business. A smart business owner should outsource bookkeeping to professionals. Types of Bookkeeping System There are two types of bookkeeping systems. A business entity can choose any one type of bookkeeping system. Some entities use both types in a combined manner. The following are the two types of bookkeeping systems: Single-entry system of bookkeeping The single-entry bookkeeping system is a basic system for recording daily receipts. It generates a weekly or daily report of a company's cash flow. The bookkeeper records one entry for each financial transaction or activity in this system. The single-entry bookkeeping system only records one side of the transaction or activity. It records only the purchases, cash receipts, payments and sales. It is used mostly by small businesses which have minimal transactions. Double-entry system of bookkeeping AThe double-entry bookkeeping system records a double entry for each financial activity or transaction. The double-entry system provides balances and checks, recording the inter-related credit entry for every debit entry. It is not cash-based, which implies that the transactions are recorded when the revenue is earned, or debt is incurred. The double-entry bookkeeping system is founded on the duality concept. It means that every financial transaction affects two accounts. It further implies that every debit entry to an account has a corresponding credit entry in another account and vice versa. This system is universally recognized and is considered correct for recording business/financial transactions. Importance of Bookkeeping for small businesses Bookkeeping is mandatory for all businesses irrespective of the nature, size, business transactions, or any specific industry. At the commencement of a business, maintaining proper records is essential. The following are the importance of bookkeeping. Records the sources of transactions Bookkeeping acts as a source of all financial transactions of a business as it records all the financial transactions from the source of the transaction, such as receipts, invoices, payment notes, etc. Bookkeeping keeps track of payments, receipts, purchases, and sales and records every transaction made to and from the business. A business's financial statements or other accounting reports are summarised from the books of accounts. Thus, all businesses, irrespective of their size, must maintain proper books of accounts in place. Assists in the decision-making process A correct and proper book of accounts provides companies with an accurate measure of their performance. The information provided helps in making general strategic decisions and sets standards for its income and revenue goals. Bookkeeping is a dependable source for companies to measure their financial performance. Bookkeeping helps maintain all financial records of a business that reflect the financial position of the business. The companies can instantaneously get detailed information about each income or expense through bookkeeping. Gives information to prepare financial statements Bookkeeping summarises the expenditure, income and other ledger records periodically. Since the bookkeeping records and traces all financial transactions, it is the starting point of accounting. If a company's bookkeeping is improper, the company's accounting will be inaccurate. Bookkeeping is the basis for preparing financial reports. It gives specific information about the business, like how much profit it has made or the business's worth at a given time. Legal requirement It is a legal requirement to maintain financial statements and books of accounts. In the case of banks, companies, or insurance companies, the acts regulating them require the maintenance of proper financial records. Thus, bookkeeping becomes necessary for such companies. What are the Bookkeeping Challenges faced by Small Business? Accounts Receivable/Collections Small companies usually face problems in optimizing their accounts receivables. They might perform work but not be paid for a long time. Small businesses need to track their accounts receivable diligently. For this, they can hire an Online Bookkeeping Service Provider who keeps track of the cash flow and helps in the proper management. We also regularly monitor the accounts receivables to ensure that clients pay on time. Irregular Cash Flow Small businesses looking to expand their market face liquidity and investment opportunities management issues. Cash flow is disorganized; without a well-organized cash flow, it becomes challenging to track balance payments and accounts receivable. We manage cash flow statements, which gives a clear insight into the liquid resources. Managing Paperwork It can be difficult for small business owners to remember their expenses, mainly if they track them on paper. Therefore, achieving accuracy when tracking expenses can be challenging if no proper system is in place. With our online bookkeeping services, small businesses can track their expenditure using technology. We use expense management software and accounting suits to help small businesses achieve maximum accuracy in expense management. Closing the books Each Month If a small business wants to create a profitable business, it should gather all of its crucial information and metrics at the end of each month. Gathering data will not be possible if the accounts are closed at the month's end. If it is not done, timely reporting of information will not be possible, and well-informed decisions cannot be taken. As the risk is so prevalent, it is advisable to seek the assistance of an expert. Tax Preparation Every business must pay taxes irrespective of its size. Many small business owners face trouble meeting the demands of their taxes. Missed quarterly estimates, under-withholding, missed deductions, and improper filing are just a few common mistakes in bookkeeping. With us, you can be assured that your accounts are accurately kept. Further, our tax experts manage your books and help in tax preparation.