Bookkeeping 101--The Ultimate Guide
Being able to track your company's finances, keep an eye on cash flow, and be prepared for taxes are all critical to the success of any small business. However, using QuickBooks® or Excel spreadsheets for handling your bookkeeping and accounting isn't ideal for managing finances and driving business insights for the future.
Bookkeeping is the process of recording financial activities consistently. Bookkeeping software is accounting software that allows you to manage your financial activities in a single digital location. It also helps you keep track of the books, accounts and other essential information about your business.
The best bookkeeping software will allow small businesses to do everything they need to run their business without hiring an accountant or paying someone else to do it. You should be able to access your data anywhere at any time.
Bookkeeping for GovCon Firms
What is Bookkeeping?
Bookkeeping is the work of maintaining your general ledger—the record of all your expenses and incomes. Bookkeeping is the act of recording the daily transactions of a business. It includes things like paying bills, tracking inventory, and making sure sales tax is paid.
Bookkeepers, and associated services, can assist businesses by helping them avoid mistakes in their financial and accounting processes that could lead to tax evasion and financial fraud.
Here is a short checklist of bookkeeper services that are typically provided for clients:
- Processing vendor bills and related payments
- Posting credit card transactions
- Preparing customer invoices and posting related deposits
- Assisting in the collection of past due invoices
- Reconciling bank, credit card, and merchant accounts
- Posting payroll
The Difference Between Bookkeeping and Accounting
Both bookkeeping and accounting involve managing financial transactions and accounts. There are two main differences between these two approaches. One is the scale and the other is the depth. Bookkeeping is simply the recording and monitoring of financial transactions. They include sales, purchases, receipts, and payment records made by the company.
Accounting is a more complex financial solution. Accounting is the documentation, analysis, classification, summarising, and interpreting of financial data.
While the two solutions are related, they address two aspects of financial planning and management. Bookkeeping primarily involves recording financial information and may include rolling up the numbers, whereas accounting focuses on tracking the figures, managing them, and using the data to improve the company. However, this division has shifted significantly due to SaaS solutions.
Simply put, bookkeeping is more transactional and administrative, concerned with recording financial transactions. Accounting is more subjective, giving insights into your business's financial health based on bookkeeping information.
Why Choose Bookkeeping Software?
There are many reasons why you would choose bookkeeping software instead of doing it manually.
- Save money: The cost of hiring an accountant or paying someone to help you with bookkeeping is more than maintaining a system that automates repetitive tasks.
- Prioritize managing the business: Software solutions allow organizations to focus on running the business rather than managing their books.
- Centralized data repository: Bookkeeping software provides a centralized location for all financial data.
- Real-time financial data: Companies can track finances in real-time to provide better reporting and analysis.
- Collaboration: Bookkeeping solutions allow you to share your financial data with others more easily.
How to Choose the Best Bookkeeping Software
Choosing the right bookkeeping software depends on how much work you want to save and how much control you want to maintain over your data. If you're looking for a basic tool to simply track data, then a spreadsheet application like Microsoft Excel or Google Sheets may be sufficient. However, if you want to get the most out of your bookkeeping software to manage your business better, you'll need something more robust.
There are several factors to consider when choosing which bookkeeping software is right for you. These include:
- How much control do you want over financial data? If you want complete control over your data, then you will need to invest in bookkeeping software that has features designed specifically for small businesses. For example, tools let you create invoices, maintain customer data, track inventory, manage payroll, and send statements directly to customers.
- What accounting features are important to you? Does the software offer features like invoicing, inventory management, payroll processing, etc., vs. providing essential bookkeeping tools? Some more purpose-built solutions offer advanced capabilities such as tax preparation and payroll processing.
- How much time will you spend using the bookkeeping system? The time you spend using the system will depend on how often you use it. Some systems require you to enter data each time you perform a transaction. Others automatically update your accounts at regular intervals.
- Is there software support available? Can you get technical support if something goes wrong? Do you have to pay extra for support?
- Can you customize the accounting software to fit your needs? Is there a way to change the look and feel of the software? How well does it integrate with other applications? Can you leverage content from other resources to make better decisions?
Key bookkeeping software features
The introduction of information systems to support accounting has significantly reduced the overhead involved in bookkeeping. Optical character recognition (OCR) and bank feeds have made it easier for companies to automate their bookkeeping processes.
You no longer need to wait for receipts to be scanned onto your computer before entering them into bookkeeping solutions. Now, you can enter financial transactions right away from your phone. Reconciliation happens through daily banking feeds in real-time, so the end-of-the-month closing process is quick and easy.
Bookkeeping features vary from program to program, but there are some common attributes for any successful SaaS solution.
- Recording financial transactions
- Posting debits and credits
- Producing invoices
- Prepare simple financial statements, including balance sheets, cash flow, and income statements
- Maintaining and balancing subsidiaries, general ledgers, and historical accounts
- Completing payroll
- Preparing tax returns
Types of Bookkeeping Software Deployment Options
There are two main types of bookkeeping software deployment options available today. Online bookkeeping software and desktop bookkeeping software.
Desktop Bookkeeping Software
Desktop bookkeeping software is typically installed on your computer desktop, meaning you have to install it yourself. Once installed, you can open the program and begin using it immediately, ranging from simple spreadsheets to out-of-the-box software.
SaaS or Cloud-Based Bookkeeping Software
Online bookkeeping software is accessed online through a web browser. Internet access makes it easy to access your data from anywhere. Additionally, cloud solutions are maintained, supported, and updated via the hosting software vendor, simplifying product maintenance. It also reduces the overhead needed to support the product, allowing small businesses to grow along with the software.
QuickBooks vs. Deltek
Purpose-built software has long been used by large government contractors to help them manage their projects better, improve project visibility, boost cash flow, and comply with regulations.
However, the costs and IT resources required for these solutions have been too expensive for many small-to-medium-sized contractors. Smaller businesses often rely on low-priced, generic accounting software, spreadsheets, and disjointed project management and scheduling tools to track and report on their project's performance.
These tools make companies vulnerable to increased close times, failed audit checks, suspended payments, unintended cost increases, and high consulting fees to adapt generic software to specialized requirements.
A generic solution like QuickBooks provides a two-dimensional view of your business: General Ledger and Organization. Data from project management systems and manufacturing databases are not integral to the software itself but instead attached to the application.
It's challenging to keep track of data in two-dimensional accounting systems, especially when there's no guarantee of accuracy. The general ledger and project ledger do not tie together, so your business stays in a constant state of reconciliation.
Project accounting software tools like Deltek can tie inventory, materials, travel, labor, and other direct costs directly to each project. Further, it allows you to identify which organizations, products, and portfolios are costing you money. You can see key details not just for individual projects but for entire programs and portfolios as well.
It's essential to have a solution purpose-designed for your needs and industry.
How Do Deltek Accounting Systems Power Project Success?
At Deltek our mission is to deliver solutions that help our customers connect and automate the project lifecycle that fuels their business. We believe that better software means better projects. Our industry-focused expertise makes your projects successful and helps you achieve performance that maximizes productivity and revenue.