Maintaining accurate financial records for your small business can be difficult and sometimes confusing. Whether you love it or hate it, small business bookkeeping is essential for success. It’s your personal scorecard of how well your business is doing. If you own a small business and struggle with your financial records, here are seven tips that will help you observe the best bookkeeping practices.
Separate Business and Personal Finances
When running a small business, you are usually responsible for pretty much everything, which includes managing your books. For this reason, you may find yourself mixing personal and business expenses or income. To avoid this, make sure you separate business and personal finances. Get a separate business credit card. This will save you a great deal of energy and ties when going through your business books because you won’t need to filter out your personal expenses. Getting a separate bank card for your business will also help your business build its credit rating.
Establish A Routine
Bookkeeping can be complicated. You should, therefore, have a schedule in place that allows you to keep track of everything. We suggest you come up with a schedule that enables you to record income and expenses daily, weekly or monthly. A schedule will make it easy for you to keep track of everything, including vendor payments, taxes, payroll and expenses. Getting into a routine will also make it easy for you to budget for tax as you go so you don’t get surprises when the tax season comes. If you don’t perform regular financial check-ups, you will end up with overdue invoices, bounced checks or figures that don’t add up. You don’t want that, right? All you need is to create a routine and stick to the bookkeeping schedule.
Keep Your Records Organized And Safe
Another important tip is to keep your records organized and safe throughout the year. If your records are all over the place, it’ll make record keeping hard. Keep your records organized. This will help make your financial records more accessible and also make it easy for you to quickly and easily retrace essential financial transactions. You will also have an easy time when doing your taxes. Here are the best bookkeeping practices that will help you keep your books organized for easy access.
• Have A Central Location For All Your Paperwork
Instead of keeping your statements, receipts and other documents in random places, keep them in a central location, ideally in a cabinet or fireproof safe.
• Label Everything
Make sure all your financial records are clearly labelled. This way, you can easily identify them and grab them when the need arises.
• Get Rid Of The Word “Later”
File everything immediately upon receipt. This will ensure you don’t miss any important entry.
• Keep Active Financial Records Accessible
Make sure that the files you need to get in and out routinely are kept in a location where you can easily access them.
When organizing your files, always make security a priority. Ensure your file cabinet or safe is securely locked. Your computers should also be password protected. Don’t keep your backup copies in the same location with your original files. Keep them in a separate location, such as a safety deposit box.
Automate Whatever You Can
There are hundreds, if not thousands, of programs out there that can help you automate your bookkeeping. Why automate? You ask. Automating your bookkeeping will help you save time. You won’t be required to spend lots of time preparing reports and reconciling statements manually. Once you enter information into the bookkeeping software, you’ll never have to enter that information again. But that’s not the only benefits automating your bookkeeping. Other benefits include:
• Improved Accuracy
Because you are not constantly re-entering information into your bookkeeping software, the incidences of error will reduce significantly. Small business bookkeeping tools also help with calculations, including payroll deductions, sales taxes, subtotals and totals for every type of transaction.
• Thorough, Custom Reports
Preparing reports can be overwhelming and time-consuming. You are also likely to miss some important information when preparing the reports. Bookkeeping programs have inbuilt report templates that make it easy for you to come up with customized reports that are accurate.
• Real-time Business Intelligence
Automating your bookkeeping practices will help you get real-time business intelligence that you can use to make critical decisions and improve your business. You’ll also save time and focus on developing your business.
Tip: When choosing bookkeeping software to help you automate your bookkeeping, go for cloud-based software. Cloud-based bookkeeping tools can be accessed from anywhere with any device, as long as you have an internet connection.
Consult A Bookkeeping Expert
Let’s face it; you are not a bookkeeping expert, which means you’ll have lots of questions that require answers. Consulting a bookkeeping expert can help you get answers to all your questions. Here are other reasons why you should consult a bookkeeping expert:
• Accounting For All Deductions
Like most business owners, you are frantically thinking about how you can maximize taxes right? Consulting a bookkeeping expert will make it easy for you to identifying all potential deductions. They will also help come up with strategies that will help you get more deductions and reduce taxes.
• Avoiding Or Handling Audit
Want to avoid the dreaded audit? Make use of the counsel of a bookkeeping expert. They will help you fix any issues in your records and keep you away from the taxman’s bad books.
• Saving Time And Energy
Trying to fix a complex accounting problem on your own can be difficult and time-consuming. A bookkeeping expert will help you solve it quickly and easily. This will save you huge amounts of money, time and energy.
• Avoiding Costly Mistakes
A bookkeeping expert will help you avoid errors that could arise during reporting and keep you from making wrong financial decisions. Most importantly, they help keep you on the road toward your business goals.
Budget For Tax
Small business bookkeeping and preparing for the tax season can sometimes be difficult and confusing. It is, therefore, important to ensure you budget for tax. This will ensure you are ready to file tax returns when the tax season comes. If it’s possible, open a business savings account and put a dedicated sum of money for taxes. Also, sync the IRS website’s tax calendar for businesses with your bookkeeping software’s calendar so you’ll never be caught unawares.
Perform Regular Self-Audits
Make sure you perform regular self-audits. Why is this important? Well, a self-audit will help you know how well your business is doing and avoid making mistakes. Regular self-audits will also help you prevent and detect various forms of fraud and bookkeeping irregularities. Routine internal audits will also help you ensure your business is complying with all accounting laws and regulations. It’ll also give you peace of mind, knowing that you are prepared in case there is a need for an external audit.
Bookkeeping for small businesses can be difficult and time-consuming. But don’t let that scare you. Just follow the tips we have highlighted above. They will make your bookkeeping easier and stress-free. They’ll also improve accuracy, business efficiency and help you avoid the mistake that most companies make. Make sure you follow them to the T!