Do you dread bookkeeping? It doesn’t have to be a dreaded task. In fact, with the right system in place, it can be a breeze!
When it comes to bookkeeping, there are two different systems that businesses can use. The double entry system is the most popular, but there is also single entry system bookkeeping.
But which one is right for your business? In this blog post, we’ll dive into the specific benefits of single entry system bookkeeping. This system is simple and easy to use, and it’s one way of helping to keep you and your business finances organised and streamlined.
1. Single entry bookkeeping is a simple, straightforward way to keep track of your finances
Single entry bookkeeping is a simple and straightforward way of keeping track of business finances. It involves recording all financial transactions in a single ledger, regardless of whether they are income or expenses. This is much more straightforward than double entry bookkeeping, which records each transaction twice (once as a debit and once as a credit).
With single entry bookkeeping, you record only one aspect of a financial transaction, marked under the appropriate category, e.g “sale” or “expense”. This makes it ideal for businesses with a small number of transactions, or for businesses that don’t have time to maintain detailed financial records.
Single entry bookkeeping also has the advantage of being easier to understand than double entry bookkeeping. This makes it a good choice for businesses that are just starting out, or for businesses that want to simplify their financial reporting because single entry bookkeeping provides a clear and concise record of all financial activity, which can be helpful in tracking spending and identifying areas where costs may be cut.
2. It’s perfect for small businesses who are just starting out
Small businesses have a lot of balls to keep in the air. They are often run by one person or a small team, which means that there is usually a limited amount of time and resources available.
That makes single entry bookkeeping the best option for small businesses because it is relatively simple and straightforward. With single entry bookkeeping, transactions are only recorded once under a personal account of all the creditors and debtors, which determines the amount of credit purchases and/or sales across a given period. This removes the need to worry about producing real and nominal accounts, a balance sheet or a trial balance.
Although this is seen as one of the disadvantages of single entry bookkeeping, this type of bookkeeping can save time and reduce the risk of errors, which can be costly.
Plus because each of the many business transactions are recorded in one place, it mitigates the worry of having to keep separate records for each account, which makes it easy to spot errors and discrepancies. This can save small businesses time, money and effort in the long run, as less, and valuable resources, are spent correcting mistakes.
3. Single entry bookkeeping is easy to learn and use, so you can get started right away
Single entry bookkeeping is the simplest and most straightforward method of bookkeeping. In single entry bookkeeping, transactions are recorded as they occur, without categorising them into assets, liabilities, or equity.
This makes single entry bookkeeping very easy to use, as you don’t need to worry about which category each transaction falls into.
Single entry bookkeeping is also very easy to set up, as you don’t need to create separate accounts for each category. All you need is one account – usually referred to as “personal accounts” – for all of your transactions. As a result, single entry bookkeeping is an excellent choice for small businesses and individuals who don’t have a lot of experience with bookkeeping.
4. You’ll have a clear view of your business’s financial health, which will help you make sound decisions about the future
Because single entry bookkeeping is such a straightforward system where businesses only record transactions once, instead of recording them twice in separate accounts, it can help to improve a business’s financial health in a number of ways.
- It can help to reduce the amount of paperwork that needs to be processed, which can save time and money.
- It can help to prevent errors and inconsistencies in the accounting system
- It makes it easier to track expenses and income, which can help businesses to make more informed decisions about spending
- It can help businesses to avoid duplicating transactions and;
- Single entry bookkeeping can provide a clear and concise record of a business’s financial activities, which can be helpful for tax purposes or during an audit.
5. There are many software programs that can help you with single entry bookkeeping
Software can be a big help with single entry bookkeeping, and there are a number of different programs which can help. When you’re entering data into the software, it’s automatically categorised and stored in the appropriate place. This can save a lot of time compared to traditional bookkeeping methods, where you would have to manually keep track of all your transactions. Additionally, single entry bookkeeping software can help you generate reports and analyse your data. This can give you valuable insights into your business that you might not have otherwise had.
Plus, single entry bookkeeping software is designed to make bookkeeping as easy and straightforward as possible. Instead of having to learn complex accounting principles, you can simply enter your income and expenses into cloud accounting software and let it do the rest.
6. You’ll have a better understanding of your financial situation and where your money is going
One of the main single entry system advantages is that it helps businesses to have a clear understanding of their financial situation. This system provides a complete picture of all the business’s income and expenses, which makes it easier to make informed decisions about spending and investing. Single entry bookkeeping also makes it easier to track cash flow, since all transactions are recorded in one place. This can be helpful for businesses that want to keep a close eye on their spending and monitor their financial position.
7. Single entry bookkeeping is an excellent way to prepare for tax season
Single entry bookkeeping is great for tax season as it eliminates the need to reconcile accounts – because there is only one account to review.
A single entry system is particularly helpful for tax purposes, as it can provide a clear and concise record of income and expenses. This can make it easier to prepare tax returns and ensure that all relevant information is included. While single entry bookkeeping may not be suitable for all businesses, it can be an effective solution for those who want to save time and hassle come tax season.
Final thoughts
If you’re looking for a simple and efficient way to keep your small business accounting in check, consider using a single entry bookkeeping system. This type of system has many advantages, including being easy to understand, effective and requiring only one set of records to be made.
But alternatively, if you don’t have the time to get to your business accounting or bookkeeping, at Raw Accounting, we can help. We can take care of all your bookkeeping needs so that you can focus on what you do best – running your business! Have a free initial no-obligation chat with us today and learn what we can do for you.
