Keeping up with the accounting and bookkeeping is a tedious task for any business. But it is more challenging for a small business owner to function operations and do bookkeeping! Instead of handling the operational activities of the company, small business owners are stuck in the invoicing, transaction recording, and reconciliation tasks.
Each business regardless of its size, nature, and Industry, must have a pre-outlined bookkeeping system in place. Periodically many firms have failed to succeed as business owners couldn’t pay attention to the revenue, and expenditure. Keeping accurate records will allow the small business owner to stay on top of company profits and losses.
Here, in this article, we have covered the Basics of bookkeeping and the top seven Bookkeeping tips for small businesses.
Basics of Bookkeeping
Bookkeeping is the continual practice of updating a firm’s financial records to reflect all financial transactions, credits, and debits. Bookkeeping outsourcing service providers prepare and track financial documents, including basic data entry, categorizing transactions, managing accounts receivable, running payroll, invoices, and bills, and creating financial statements to ensure the business is ready for the upcoming tax season and other financial reporting requisites.
The key components of bookkeeping include:
- Recording Transactions
- Categorizing Expenses
- Reconciling Accounts
- Generating Reports
- Maintaining Receipts and Invoices
Accountants rely on bookkeeping records to analyze and advise on the financial activity, health, and growth potential of a business. Bookkeeping is an essential task that you must undergo as a small business owner. Now that you have had an overview of bookkeeping, let’s take a deep dive into the top 7 Bookkeeping tips for small business.
Key 7 Bookkeeping Tips for Small Business
1. Keep your Personal and Business Expenses Separate:
This is important to help keep everything organized. When you keep separate bank accounts and credit cards for your business, it will make the task of tracking your finances a lot simpler. A separate business bank account is often required, depending on your business structure.
This bank account will save you so much time, headaches, and, of course, hassle when it comes time to track expenses for your business, reconcile accounts, and provide accurate financial statements.
Tip: Do not forget to also reimburse yourself for those personal expenditures that you may have used for business purposes. The company can just write you a check to reimburse that expense you paid with your funds.
2. Stay organized and Maintain Audit Trail:
One of the best bookkeeping tips for small business owners is to stay organized. It is also important to maintain files, both in soft and hard copy, that you can refer to at any time you wish. This will save you time and reduce a lot of stress when it’s time to review your finances or prepare for the tax season.
An audit trail is a set of documentation that establishes that your recorded transactions and quantities are correct. If any problems arise, like an over-assessment of taxes or missing source documents or transactions, your documentation will retrace your steps. Documentation will point the way and help steer your financial decisions so your business can grow and scale through firm forecasting.
3. Choose a Cloud-based Accounting Software:
One of the great ways to ease your bookkeeping is using cloud-based bookkeeping software. Technology allows us to sort through piles of paperwork, check spreadsheets, and do manual calculations every month. The hardest part of this work is now being done for you by cloud-based software. The accounting software you use can send invoices to your customers automatically on the due date, track all your incoming and outgoing expenses, and prepare your cash flow reports.
There are numerous software options available. High-end small business accounting software like QuickBooks will have all relevant features like Automation, One-click reporting, Organizing expenses, Process payroll, and many more.
4. Stay consistent with the Account Reconciliation:
Since bank and credit card accounts are the initial source of bookkeeping data for your business, you cannot afford any transaction to bypass your accounts. Reconcile your accounts in a timely way, at least monthly. This will enable you to catch errors at the earliest and maintain accurate financial records. This practice will also uncover any duplicate or voided transactions that are incorrectly showing in your account.
5. Monitor Cash Flow Realistically:
Monitor your cash flow regularly to make sure you have enough funds to meet expenses and invest in growth opportunities. This is easily overlooked at the outset, but you also have to record your payments in cash. Make your recordings of cash payments in such a way that you will know who paid so that you do not run around following them afterward.
Make cash flow statements to keep track of the inflow and outflow of cash and see any possible problems arising in cash flows before they reach the critical level. Small business owners should also be ready for the unforeseen costs that always accompany being a business owner, and having the emergency money will make it less painful.
6. Keep Up with Tax Deadlines:
Remember, at the end of the year, some of your income must be reserved for paying taxes. Nowadays, any business should ensure that tax issues are handled with a lot of precision. Not meeting tax deadline dates can come with a heavy price of penalties and interest charges.
Tip: Do keep abreast with your tax obligations and dates; these are the key tax filing dates you should have in your calendar. You may want to engage a tax professional to make certain you meet the necessary filing requirements and also take advantage of all the tax deductions and credits that can be claimed.
7. Outsource from Professional Accounting Service Providers:
Bookkeeping could be complex, not to mention after your business has expanded. Do not hesitate to seek professional help whenever you may need it. One of the very important bookkeeping tips you can observe is working with the right group of professionals.
An accountant or a bookkeeping service, such as MeticMinds, will provide expertise, save your time, and ensure that your books are accurate and in compliance with the regulations. It is said that, by getting help from an outsourced account service provider, you will ensure that these most important financial details of your company are actually under the purview.
Final Note
Small businesses must be particularly mindful of their bookkeeping needs so that their revenue and operating costs are handled faultlessly. These Bookkeeping tips for small business owners will help your company stay organized, competitive, and productive.
It is advisable to follow the bookkeeping tips above to better understand your company’s cash flow, have fewer tax issues, have more growth opportunities, and implement them to defend your business from unnecessary loss.