The use of bookkeeping services has been a way that many businesses have been able to save precious time and money. Entrusting finances to a bookkeeper can be a little nerve-wracking since they see a lot of financial information, but most bookkeeping services pride themselves on being very secure and confidential with their clients’ private information. The different types of bookkeeping services can be summed up in three main kinds: Single entry, double entry and online. Not all financial management systems are going to do the same services and sometimes your business will benefit from one type of service and not another. Check out these summaries of the different bookkeeping services below.
Single Entry System
This method of bookkeeping maintains financial information by relying on a more single-sided method of entry. This is typically a type of system used by small businesses since it only records the basic information such as taxes paid, accounts payable, cash and accounts receivable. A professional bookkeeper would usually put together the information from this system using an income statement and statement of affairs. The advantage of the single entry system is that it is simple and much more affordable than the other types of bookkeeping services.
- Advantages of the single entry system include daily and monthly summaries of cash receipts. The entry of transactions with this system can merely be recorded in a notebook, journal, ledger or combination of them.
- Disadvantages to this system are that it can be easier to make mistakes and let things slide through the cracks including theft. Since it is not as precise of a system, it may end up being inefficient.
Double Entry System
A double entry bookkeeping system records more than one side of a transaction in order to keep a more accurate record of transactions that happen. This kind of accounting takes into account what was lost and what was gained in a transaction. The two aspects accounted for in the double entry system are debit and credit.
- Debit records account for effects such as an increase in assets and expense as well as a decrease in liability, equity and income.
- Credit records account for the opposite – the effects of a decrease in assets and expense along with the increase in liability, equity and income.
Double entry accounting is more accurate than the single entry method because it is more like an equation and must be balanced. Any increase in expense will be offset by a decrease in assets or increase in liability or equity and also the other way around.
Online bookkeepers and bookkeeping services are becoming increasingly more popular because of the newer technology that keeps business information safe while also making it available for access wherever you are and whenever you need it. These programs require software-based programs such as QuickBooks or SQL-Ledger.
- The advantage of this system is clearly the convenience of being able to have access to the information and documents even if the provider and clients are in different locations or are mobile in how they work. These systems are usually much cheaper and less time consuming than any other type of bookkeeping system.
- The main disadvantage of the online system is that many businesses never meet their provider and do not have a close contact relationship with the people handling their finances. This can be risky but if research is done on the provider, there are plenty of trustworthy companies with very advanced security technology on their side.