Why Bookkeeping is Important
Why do you care about bookkeeping? Think of trying to build a house without having blueprints—a disaster, right? Bookkeeping is that guidebook for your business, keeping it all in check. It enables you to watch over cash flow, makes great decisions based on information as opposed to impulse and helps your business stay in good financial health. No matter if you are an entrepreneur, a freelancer or running your own small business some good bookkeeping is what makes the wheels go around for all of those.
Basic Bookkeeping Terms - What Is It?
But before we get deeper, let us first look at some basic bookkeeping terms.
Assets:What your business owns (cash, equipment…etc.)
Liabilities:What your business is obligated to pay (lones, credit card debt).
Equity:Owner's share of the business
Revenue:The cash that your business generates
Expenses:The outgoing cash from your business.
Knowing these definitions will put clarity to your financial reports and statements.
Selecting an Appropriate Bookkeeping Approach
The two most common forms of bookkeeping are cash basis and accrual.
Cash Basis:You record a transaction when you receive or pay the cash. This method is also easier and effective for smaller businesses
Accrual Basis:This means that you record the income and expenses when they are earned or incurred, regardless of cash changing hands. While this method gives you a clearer view of how much money your business has, it can also be more complex.
So, as a non-USA resident you would need to determine the option that has more sense and is relevant for your business needs + legal obligations.
Managing Expenses and Income
DBA Registration for Non-US Residents
Recording your income and expenses is one of the most important parts of bookkeeping. You will also need to categorize your expenses, such as rent and utilities vs. email marketing services charges (to clarify Sales vs Services income). This will aid in tracking profitability as well as making taxes a breeze.
Keeping Track of Receivables and Payables
You have receivables — money owed to you by your customers; and payables, in which are what you owe to suppliers. Managing these allows you to keep track of your cash flow. Having them higher implies a liquidity problem, so you must be very careful with this balance.
The Importance of Proper Records
Having accurate records is crucial to the success of your business. Imagine bookkeeping as a diary of significant events, where every important marriage calls for an entry to be made. Incomplete or incorrect recordkeeping can result in improper fund management and legal difficulties. Make sure to document well all your transactions, receipts and invoices.
Using Bookkeeping Software
Today, when everything has gone digital no one is following manual bookkeeping. In this regard, using bookkeeping software frees up time for you to do other things with your life and it helps in minimizing errors specifically when an account is being handled manually. There are various options available to you like QuickBooks, Xero and Freshbooks. Pick one which fits your requirements and pairs well with other tools in use.
Dealing with foreign currency
As a non-USA resident, it is possible that you are handling different currencies. Foreign Exchange Rate Management can be a complicated thing, but you need to make your money appear correct according to financial records. Use multi-currency transaction-enabled software and watch out for exchange rates to not get lost in the shuffle.
Tax Considerations for Non-U.S. Persons
Taxes can be a tricky part for you, and even trickier if not from USA. Depending on your country of origin, you could also end up with tax liability in addition to the one that may arise from entering or residing in the U.S. Make sure to read about what treaties exist between this country and yours before proceeding as non-compliance can lead down heavy fines if not converted into locally adopted law by yourselves at home! Seek out a tax professional with knowledge of both jurisdictions and this can be extremely helpful.
Mistakes To Avoid In Accounting
Mistakes happen, but some bookkeeping mistakes can be expensive. Common errors include:
Mixing business and personal finances
Not reconciling your bank statements routinely
Overlooking small expenses.
Some mistakes can be avoided by keeping track of things and checking your records frequently.
The Role of a Professional Bookkeeper
You’re not alone, if bookkeeping frightens you. All of that means based upon everything outlined above, many business owners need to hire a bookkeeper. They can assist you in keeping your finances on track, double-checking data accuracy and ultimately save you time to work towards building/growing your business. Treat this investment as a guarantee that the health of your business is not compromised.
