Bookkeeping 101

Bookkeeping is the steady recording of financial transactions. Accurate books support your tax filing, your investor reporting and the decisions you make in between. Even if you outsource it, knowing the basics lets you spot an error and ask a better question.

Bookkeeping and accounting

Bookkeeping records transactions consistently: sales, expenses, payroll, transfers. Accounting interprets those records through adjustments, analysis and formal statements.

Good bookkeeping cuts the cleanup at month end and lowers your audit risk. The daily recording is the operational discipline that makes everything after it cheap.

What you need to keep

A general ledger, the receipts behind it, bank statements and copies of invoices. Store documents digitally with a naming convention, and reconciliation stops being an archaeology exercise.

Separate business and personal accounts on day one. Mixed funds complicate deductions and weaken the liability protection of many company structures.

• A general ledger with transactions categorized
• Accounts payable and receivable subledgers
• Payroll records and tax withholding documents
• Bank and card statements matched to entries

The routine

Enter transactions weekly at the very least, daily if volume is high. Reconcile the bank feed against receipts before month-end pressure arrives.

Review aging receivables and unpaid bills every month. A small oversight becomes a cash flow problem after a quarter of being ignored.

When to get help

Most founders start with software and a part-time bookkeeper. Bring in a CPA when tax gets complicated, when you are raising money, or when there is more than one entity.

Write down who does what across bookkeeper, controller and external accountant. Otherwise work gets done twice, or not at all.

Written by the team at Ambivo, a business platform that keeps CRM, accounting and ERP on one customer record. This article is general guidance on the topic rather than a description of Ambivo features.