What exactly is bookkeeping and why does it matter so much for your business?
In this episode, Danielle Hayden, reformed corporate CFO and CEO of Kickstart Accounting, Inc., breaks down the basics of bookkeeping, explains how it supports your growth, and shares the real-life benefits of staying on top of your numbers. Whether you're just starting out or scaling fast, this is foundational knowledge every business owner needs.
Key Takeaways:
- Bookkeeping Is Your Business’s Financial Foundation: It’s all about recording and organizing every transaction—sales, expenses, and everything in between—so you can make smart, informed decisions.
- Cash-Basis Accounting Is Usually the Right Fit for Small Businesses: Unlike big corporations, most small business owners don’t need complex systems. Recording transactions when cash hits or leaves your bank account keeps things simple and clear.
- Timely Bookkeeping Saves You Time, Money, and Stress: When your books are current, you can avoid overpaying in taxes, make better business decisions, and skip the last-minute scramble at tax time.
- Accurate Books Protect You in Audits and Increase Your Business’s Value: Clean records mean you're IRS audit-ready, and if you ever need to sell or get a valuation, your bookkeeping can directly impact your bottom line.
- As the CEO, You’re Still Responsible: Even with a bookkeeper, it’s your job to communicate business changes and review your reports regularly. That’s how you turn numbers into growth.
Special Note for S-Corp Owners: You must have accurate financials to file correctly and stay compliant. That means both income statements and balance sheets—don’t skip this step!
Topics Discussed:
(00:29 – 01:33) What is Bookkeeping and Why Does It Matter?
(01:34 – 03:59) The Difference Between Small Business and Corporate Bookkeeping
(04:00 – 08:26) The Benefits of Accurate, Up-to-Date Bookkeeping
(08:27 – 09:09) Why Cash Balance Is Not the Full Financial Picture
(09:09 – 09:43) Special Considerations for S-Corp Owners
(10:19 – 12:37) The Importance of Taking Responsibility for Tracking Your Numbers as a Business Owner
Book a Call with Kickstart Accounting, Inc.:
https://kickstartaccountinginc.com/book-a-call/
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YouTube | https://www.youtube.com/@businessbythebooks
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Episode Transcript
00;00;00;00 - 00;00;29;13
Danielle Hayden
Have you ever wondered what exactly is bookkeeping and why is it so important for small business owners? Well, in today's episode, we're going to break down what bookkeeping is, why it's so crucial-no matter what size of your business-and how you are going to use bookkeeping to help you grow your business. You're listening to Business by the Books, the podcast that teaches you how to use your financials to manage your business.
00;00;29;13 - 00;01;05;24
Danielle Hayden
So what is bookkeeping? Bookkeeping is really just the process of recording, organizing, and maintaining a business's financial transactions. So this is really the foundation of your business. Bookkeeping is the act of actually going through and organizing every single transaction, whether that be a sale or an expense. So where you're receiving money or you're spending money. So in bookkeeping, we're organizing all of those transactions and creating the financial data
00;01;05;26 - 00;01;34;09
Danielle Hayden
that's going to then be accessible for your decision making, for your tax preparation, for that financial analysis. So without bookkeeping, the other members in our money team can't do what they're good at until they have that foundation put in place and they know that everything is accurate in order for them to give you the correct information and advice to move forward.
00;01;34;15 - 00;02;13;07
Danielle Hayden
Now, there's so many differences in bookkeeping for small businesses and big businesses. Here at Kickstart Accounting, Inc., we do bookkeeping for clients who are operating small businesses. So generally under $3 million in sales, but starting with clients around $100,000 a year in revenue, and this is so different than bookkeeping for big businesses who have payables and receivables. And when I talk to fellow accountants and bookkeepers, we tend to, in the accounting field, make things so much more complicated than they ever need to be.
00;02;13;08 - 00;02;39;21
Danielle Hayden
Accountants want to make things complicated and having a long list of payables. So, who you're going to owe money to in the future, recording every transaction before it's due or recording transactions for your clients and collecting on receivables. I know these are big accounting terms. And when we look at small business owners, most of us are filing their taxes on a cash basis.
00;02;39;23 - 00;03;04;26
Danielle Hayden
That means when we have cash that hits our checking account, it is considered revenue. So cash in is considered revenue unless you, as the owner, has invested it into the business, and cash that comes out of the business is considered an expense. And we record those transactions when they hit the bank account rather than in the future before it happens.
00;03;04;28 - 00;03;34;06
Danielle Hayden
So if you get really confused when you talk to fellow accountants or tax accountants who are talking about recording payables and receivables, and you leave the conversation thinking, gosh, I'm a small business owner, I don't know that I need all of that in my business. Let me tell you, you are not wrong. What you need is a bookkeeping system that allows you to record the transactions as they come through your checking account.
00;03;34;07 - 00;04;00;09
Danielle Hayden
We call this cash accounting and this is what we do for most of our clients at Kickstart. We do have some clients who use accrual basis accounting, but most of our clients use cash basis. And this allows us to understand the financial impacts of your decisions right away. So we use a bookkeeping system here at Kickstart that is made for you as a small business owner.
00;04;00;09 - 00;04;22;03
Danielle Hayden
So why do you need bookkeeping in your business? I'm going to give you a laundry list of reasons. As I was preparing for this episode, I kind of chuckled at myself how many bullet points I was able to write down for the benefits of bookkeeping. First of all, long-term, when you have bookkeeping in your business that is updated on a regular basis
00;04;22;04 - 00;04;49;22
Danielle Hayden
it saves you time. You're not looking at the cash balance of your checking account and then thinking, oh my God, I don't know what happened, but I don't have time to go back through and do hours worth of bookkeeping today to figure out where I spent money. When you have bookkeeping that's current, you're able to save more time so that you can spend the time as a CEO making business decisions.
00;04;49;25 - 00;05;16;21
Danielle Hayden
Having accurate bookkeeping is going to save you money in the long-term. You are going to have a clear picture of where you're spending money today, and how it aligns with your goals in the business this year. So by spending money intentionally, you're able to save money overall because you're not spending money in areas that aren't serving you and your business.
00;05;16;24 - 00;05;53;06
Danielle Hayden
You're also not going to be overpaying in taxes. So we are saving a ton of money by not overpaying in taxes. One thing that breaks my heart is when I see new clients that come to Kickstart who've been doing their own bookkeeping for years, and they'll tell me, I think I was doing a really great job. I'm like, oh, I'm going to have to break this to them, because what we see is that a lot of times these clients are duplicating sales from systems, so they've overpaid in taxes in previous years where they've duplicated expenses, missed out on expenses because they weren't reconciling.
00;05;53;08 - 00;06;19;05
Danielle Hayden
They are leaving money on the table by not having the correct bookkeeping in place. Another one is having owner’s drawers in the wrong section of the balance sheet for the wrong section of the income statement, and therefore you're taking an expense that you shouldn't. These are IRS red flags and when you don't have bookkeeping in place, you're not able to win an audit with the IRS.
00;06;19;07 - 00;06;40;04
Danielle Hayden
If the IRS, if you're flagged for an audit and they come in and you don't have clean record keeping, you're not going to be able to win that audit and you are leaving yourself exposed and vulnerable. All right, some other benefits: We're saving you time at tax time. At tax time, like imagine the feeling of coming to tax time
00;06;40;06 - 00;07;08;06
Danielle Hayden
and you are confident you've been making business decisions all year, been saving for taxes, and you know your numbers. You can step into tax time with a level of confidence and clarity that you do not have to be afraid of approaching your tax accountant ever again. We also have clarity in our performance. You know, we send our clients their financial statements and their Snapshot every single month.
00;07;08;08 - 00;07;27;27
Danielle Hayden
And the reason that we do that is we want our clients to know exactly how much money in profit or loss that they are making every single year or every single month. And the reason we do that is so that they can ask themselves, well, what worked? I was profitable last month. What did I do that worked last month?
00;07;28;00 - 00;07;53;02
Danielle Hayden
How do I keep doing more of that? Or I lost money? And how do I prevent that from happening again and again? So by looking at our numbers through bookkeeping-So bookkeeping is the act of recording the information. It creates the financial statements, which then when you are sent the financial statements on a regular basis, you have clarity on how your business is performing.
00;07;53;04 - 00;08;19;26
Danielle Hayden
So you can save money for taxes and you can make those decisions throughout the year so we can make timely decisions. We don't have to wait for the end of the year every year to make those key business decisions. We are spending money in July, August, September. We're not making reactionary decisions come November, December when our tax accountant says, hey, ringing the bell, you're going to pay a ton of money in taxes
00;08;19;26 - 00;08;48;22
Danielle Hayden
if you don't spend some money and lower your profits. We have the opportunity to make timely decisions instead of reactionary. Our cash balance tells us all kinds of lies. We cannot operate a business with the cash balance in our checking account. We have to use the actual financial statements and the performance to make decisions, not the cash. Cash is after debt payments, after owner’s drawers.
00;08;48;25 - 00;09;14;01
Danielle Hayden
Our number one question that we get from clients is I hear I'm profitable, but where did all my cash go? And what you're paying taxes on is on your profit, not on your cash balance. So remember we need to know both what our cash balances are as well as our financial statements. And then I have a special announcement for our S-Corp listeners:
00;09;14;02 - 00;09;44;12
Danielle Hayden
You have to have accurate bookkeeping in order to file your taxes at the end of the year. You have to be able to give your tax accountant both an income statement and a balance sheet. And we need to have your payroll correctly on the income statement and your owner's draws correctly on your balance sheet. So as S-Corp clients, you really have to have bookkeeping in place in order to be able to stay compliant as an S-Corp to keep that tax election.
00;09;44;15 - 00;10;13;04
Danielle Hayden
Lastly, having bookkeeping in place increases the value of your business. I know some of you are thinking, “I am never going to sell my business. I love running my business.” And we just don't know what's going to happen in the future. I've had so many clients over the years who have had personal situations that have come up, and they are so grateful to have that bookkeeping in place because they are able to use the bookkeeping to determine the value of their business.
00;10;13;06 - 00;10;44;28
Danielle Hayden
They were able to get more money for their business than they would have if they didn't have bookkeeping in place. All right, so bookkeeping, when done correctly, will give you the reports that you need to ensure that you are spending with intentionality and that the rest of your money team can do what they need to do. So bookkeeping creates the reports, which then allows your tax accountant to be able to do tax planning, which allows your financial advisor to help you with financial planning,
00;10;45;01 - 00;11;11;06
Danielle Hayden
and it helps your CFO create budgets so you can look into the future. It helps you work with your business coach so that you and your business coach can make the right, timely decisions together. Now, your bookkeeper won't give you tax strategies and they won't make the decisions for you, but they will create the reports to arm you and your money team with the information that they need to help you and your business.
00;11;11;09 - 00;11;33;09
Danielle Hayden
Now, remember, as a business owner, you have responsibilities no matter what, whether you have a bookkeeper in place or not. You are responsible for communicating and communicating timely. You need to let your bookkeeper know what's going on in your business. Did you open up a new checking account, credit card, loan, lent the business money, took money out of the business?
00;11;33;11 - 00;11;54;27
Danielle Hayden
It is your responsibility as a business owner to communicate with your bookkeeper and your money team. It is also your responsibility as a business owner to review the reports your bookkeeper is sending you. We've seen it so many times throughout the year here at Kickstart Accounting, where we are sending our clients their financial reports and they are scared to open them.
00;11;55;00 - 00;12;21;00
Danielle Hayden
And I promise you, we are not scary here. I want you to open the reports, book a call with your team and let us help you understand the information. Let us help you make sure that you are making the right business decisions as a business owner. So it will always be your responsibility as a business owner to review the information, to know the numbers, and to use it to make future business decisions.
00;12;21;03 - 00;12;42;28
Danielle Hayden
That is the only way that the bookkeeping can impact the growth of your business is if you take control. You use the numbers. You look at the information every single month, and you make the pivot that you need to grow your business. If you don't have bookkeeping in your business, we would love to be a resource for you.
00;12;42;29 - 00;13;26;16
Danielle Hayden
We use bookkeeping as the vehicle to help our clients understand their numbers and then grow. So we start with bookkeeping. Then we can add on budgeting, tax planning, CFO services, and financial planning. But it always starts with accurate bookkeeping first. I hope you enjoyed today's episode of Business by the Books. Don't forget to hit like and subscribe! This is the number one way we can help other entrepreneurs find this podcast, because here at Kickstart Accounting, Inc., it is our mission to help entrepreneurs understand their numbers, get access to this information, and grow and thrive in their business.
00;13;26;16 - 00;13;50;02
Danielle Hayden
So please help me, help other entrepreneurs understand their numbers so they can finally grow and thrive.