One of the most important things you should do as a small business owner is to practice bookkeeping.
Many of the world’s successful business entrepreneurs attribute a portion of their success to meticulous record-keeping. They keep track of every expense and deposit that the company makes. This helps cut down on high costs and lower the cost of doing business. On the other hand, having strong financial records makes it less probable to pay taxes on money that isn’t income.
Here’s a detailed breakdown of 12 important bookkeeping tips for small businesses.
1. Separate your business and personal banking account
Make sure you aren’t using company funds to acquire personal items. Incorrect money allocation may lead to cash flow concerns, tax filing, and auditing issues. Thus, you may face legal penalties if you break the corporate veil by combining personal and company finances.
If you own a small business, you’re probably responsible for all purchases and payments. Even if you are the only one who has access to cash, you should keep your personal and corporate accounts separate at all times.
Put money away from your business revenues every month to pay your quarterly taxes. Calculate a proportion of your income, say 25%. Transfer it before you spend it.
2. Selecting the appropriate bookkeeping software
One of the essential bookkeeping recommendations for small business owners is selecting the appropriate bookkeeping software. The majority of these accounting software solutions are simple to use and learn. Moreover, they can calculate all of your business’s costs and revenue. This is because it allows you to check your financial situation at any moment.
When deciding which accounting software to utilize, make sure to evaluate its capacity to scale with your organisation and its back office as it expands. However, it is essential to contact a competent accountant before purchasing any software. This is because some software is quite sophisticated.
3. Keep an eye on your invoices
As a business owner, you should know that late or unpaid invoices may adversely affect your cash flow. Allowing clients to keep your money for an extended period is not a good idea.
Another technique to deal with missing or late payments is to create deadlines for each client to whom you give vendor credit. Thus, if they don’t make the dates, a penalty is applied to the amount the company owes them.
Prepare and send out client invoices at the end of each task. This helps in maintaining the bank account healthily. It also allows payments to suppliers to be made on time. So, money may begin to flow in.
4. Plan for taxes regularly
Many firms forget to factor taxes into their pricing and cash flow. The cost of sale includes your tax obligation, materials, and packaging.
Keep in touch with your tax accountant regularly. This is to ensure that you’re doing everything you can to keep track of documents and costs. So, when it’s time to file, you’ll already have everything you need. Maintaining a tax organisation can also assist you in making intelligent decisions throughout the year. This helps to decrease your total tax burden and prevent costly fines.
5. Keep a check on your cash flow
Businesses rely on financial flow to stay afloat. Even a prosperous company might get caught in a cash crunch if its accounts receivable and payable are out of balance. Regularly, go over your outstanding invoices. Establish a schedule for sending reminder letters. The idea is to get paid before you have to pay your bills.
Avoid late fines. Moreover, take advantage of early payment reductions by paying the correct amount on time.
6. Examine your financial data weekly
Weekly bookkeeping reviews will keep you informed about the condition of your firm. You’ll be able to locate and examine any problems that develop. You will be able to monitor your cash flow. Moreover, this will help you learn about your weekly spending and stay up-to-date on current bills.
A business credit card, which retains a record of all spending, is another way to keep track of all the expenses and money made by the company. Furthermore, it prevents you from spending cash. So, you won’t have to worry about misplacing receipts.
7. Organise Your business paperwork
This is one of the essential features of a small company owner. You must preserve all papers used in day-to-day business transactions for future reference. Always make sure you have all bank and credit card statements, profit and loss statements, balance sheets, receipts, and invoices for the company’s sales and services. This will allow you to build a solid financial foundation for your company as it grows.
The only way to maintain documents is to have a well-organised file and archiving system in place.
8. Consult a bookkeeping professional regularly
Keep a running list of back-office questions. Also, contact your accounting or bookkeeping firm regularly for answers and recommendations. This will guarantee that you are tax-ready at the end of the year. Moreover, this will assist you in avoiding severe financial difficulties.
9. Separate receivable payments from borrowed loans
Poor financial management is one of the leading causes of business failure. The mixing of funds placed by clients with funds borrowed by the firm might cause misunderstanding. This may eventually lead to a financial catastrophe.
As a result, software that can keep track of both revenue and borrowed funds independently is recommended. This will help in easy and rapid follow-ups whenever necessary.
10. Track employee time
You can choose to automate these operations rather than manually inputting timesheet data into the system. Moreover, you may quickly input this information into your bookkeeping system with time-tracking and payroll automation. This can be done by implementing an automated approach for recording project-related expenditures and employee time.
When your company’s paycheck is processed, the assigned information from the timesheet is automatically imported. Thus, you can:
- Add custom fields to a job form.
- Keep track of the salesperson who sold a job.
Outsource everything if you find the bookkeeping too tricky or don’t have the time to handle it.
Because you have to pay for a few hours of work each month. Thus, it’s more cost-effective.
Over and above your day-to-day bookkeeping demands, experienced professional bookkeepers are frequently in a position to provide you with excellent business advice.
Because finance is the lifeblood of every company, these small business bookkeeping tactics are critical to its success. If you don’t already have one, contact a bookkeeper! Alternatively, bookkeeping software is also an option. You can keep your firm financially healthy today and in the future by following these bookkeeping tips.
Are you looking for good accounting firms? Here is a list of the Top 15 Accounting Companies of 2022.