Only 40% of small business owners say that they’re well-versed with the bookkeeping process. This is quite a shocking statistic considering that bookkeeping can make or break a business.
Without proper financial records, a lot of things can slip through the cracks and cost you more in the long run. It can make taxes a nightmare and you won’t have a good grip on your venture’s current financial situation. And while admiring your profits is fun, poring over spreadsheets can be daunting and confusing.
Keep reading for bookkeeping tips for small business that will help you crunch the numbers quickly and efficiently.
Separate Personal and Business Finances
One of the biggest mistakes small business owners make is mixing personal with business finances. It only makes a mess that requires more time and effort to sort through. Even if you are a freelancer or self-employed, maintaining separate accounts is highly recommended.
Eliminating all of your personal transactions from business accounts reduces the number of transactions your bookkeeper has to sort and reconcile. Otherwise, sorting through business accounts in half of the transactions is expensive, time-consuming, and can lead to mistakes. Skip the confusion by obeying the #1 golden rule of small business bookkeeping.
Track Revenue and Expenses
Clean records of your business revenue and expenses will give you peace of mind. Make it a habit to save receipts, document cash purchases, and jot down notes on your business purchases and expenses. Issue a receipt for every purchase.
Develop a system for naming and storing your invoices, records, and receipts. If you aren’t sure what expenses to track, just remember to document and store every transaction that involves products and services, money, and time. Record and categorize your documentation and transactions regularly to keep the work from piling up.
Automate Where You Can
Modern software has revolutionized small business bookkeeping. Most platforms allow you to synchronize your bookkeeping software with online banking, ensuring that your records are always up-to-date and accurate. And because everything is stored on the cloud, critical financial data is safely backed up.
It’s worth noting that you shouldn’t settle for any bookkeeping software. Shop for bookkeeping software that’s specially designed for small businesses. They have built-in templates for inputting and tracking items like invoices, check printing, and deposits. Last but not least, ensure that the service stores your financial information in a secure place.
Schedule a Time for Bookkeeping
If you do your own small business bookkeeping, it’s wise to stick to a schedule. You will feel more in control of your financials and eliminate the need to dig into dusty books at the end of the year when you make bookkeeping a regular task.
Make time at least once a week to enter transactions into your bookkeeping system, file and digitize receipts, and categorize transactions.
Reconciling your accounts, reviewing and running payroll, paying bills and vendors, recording the value of purchases and inventory sold, as well as reviewing your financial standing are some tasks to undertake on a monthly basis.
Accounting tasks for every quarter include recording depreciation or amortization, reporting and remitting sales tax, and assessing and writing off bad debts. At the end of the year, you’ll want to file taxes, analyze year-end inventory, review aged receivables, and create annual financial reports.
Hire a Professional
If you don’t have room in your schedule to regularly review your business finances, hiring a professional is the next best thing. Many small businesses don’t have the budget to have a full-time accountant on board, but that’s okay. A freelance CPA will do a great job at a more affordable cost.
Moreover, there are a variety of platforms that can help with different aspects of bookkeeping. Taxfyle, for instance, is a network of CPAs and tax experts that can help with all things related to taxes. You can get help with individual tax filing, small business taxes, and business incorporation.
Keep a Close Eye on Accounts Receivable
Ensuring that the money owed to your business is paid on time is crucial to the success of your venture. As such, make a point of monitoring your accounts receivable and ensuring that all invoices are paid. This is particularly important if the work comes before your customer’s payment.
Simplifying your accounts receivable can ensure that cash keeps flowing routinely in the business. You can achieve this by following through on weekly tasks: sending invoices, clearing paid invoices, documenting and tracking payments, following up on unpaid invoices, and jotting down cash payments for a clear document trail.
Reimburse Yourself for Business Expenses
There will be times when you’ll have to pay for business expenses with personal funds. As per the golden rules of small business bookkeeping, business expenses should show up in the business accounts. Don’t forget to have your firm reimburse for any business expenses you pay for with personal money.
The same rule applies to your employees. During the refund process, be sure to list the date, vendor, and purpose of the expense on a spreadsheet. Attach the receipts for proper document trail then write a check for the exact amount of the expense.
Analyze Bookkeeping Reports
Even if you have a full-time office administrator, it’s important to take an active interest in your business finances. Just because someone claims to be good at small business bookkeeping doesn’t mean they always do it right. Taking an active interest in your finances ensures that you don’t end up in financial strife due to incompetence.
As your business grows, you can implement checks along the monthly or quarterly bookkeeping cycle. For instance, you can put one person in charge of receiving and issuing petty cash, and another one can reconcile the cash box at the end of the month.
Similarly, one person could reconcile statements and bills while someone else double-checks these details in the system. It all depends on your business needs.
Grow Your Company with Efficient Bookkeeping Tips for Small Business
If you want to work smarter and not harder, the above bookkeeping tips for small business are a godsend. They will allow you to spend less time on finances and more time growing your venture.
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