Bookkeeping & accounting work is extremely important for Small businesses. So, here, we have come up with some useful bookkeeping tips for small businesses to get successful by office management and processing of the day to day accounts.
These tips are crucial and will help you avoid common bookkeeping mistakes as well as accentuate your knowledge and ability to manage and operate your business with the requisite skill.
Let’s get started and take a look at these tips one by one.
Bookkeeping Tips For Small Businesses
1. First – Keep Your Personal & Business Banking Separate
Maira, who works with a platform where you have pay to have paper written says that new entrepreneurs must make it a responsibility to open a separate bank account for their business. It should primarily be an account for which you’ll have online access. This will aid you in keeping the business funds distinct from the personal funds.
When you have to process the transactions for your personal expense amidst the bookkeeping of the business, it might seem like a waste of time. Things even turn bad if you are outsourcing or paying someone to process your accounts and your personal expenses are all jumbled up in it. It is so because it is mandatory to process them if they are mixed with business transactions. These must be coded to drawings and must be entered in the system to ensure that the bookkeeper need not spend precious time entering business data.
In case you have to employ the business money into personal expense, it is best to do a bulk transfer to the personal account at regular intervals, probably like once a week. It will prevent the bookkeeper from having to deal with small transactions and ensuring that you pay them well for their time.
Next, you’ll need savings to account for your business. In this, you’ll keep the monthly money earned from your business after the payment of the quarterly taxes. Kiara, who offers online assignment help services, says that you should calculate a percentage of the business income, probably 25% to 30%, and then you can transfer it to the account before spending it. It would be beneficial if you do it the minute your customer clears your dues.
Online Bank Accounts
These days having a bank account that has online accessibility helps a lot. It is not just quicker but also makes the process of conducting transactions easier. When your account is online, it gets easier for you do keep up with the BRS (bank reconciliations) in the software run by the bookkeeper. Hence, no more waiting for the bank to post the statement or write the checks for you to make payments.
2. Second – Have a Clear Distinction Between Personal and Business Expenses
Drawings – Personal Expense
Drawings are the amount a sole proprietor draws from his business account for his personal expense. In a way, it is a replacement for the salary for some. Gargi, who offers online assignment help Melbourne, says that the best practice here is to transfer a fixed amount regularly from your business to your personal account. You can use this account for shopping for toys, books, groceries, etc. It is easier to maintain your business account if you make regular drawing amount transactions from the business account.
Business Expense vs Private Expense
Every business owner must recognize and know the type of expenses, which can be claimed and those that cannot be claimed. Jiah, who offers the best digital marketing course online, says that every expense that is directly related to the running of the business or towards the production of the income is tax-deductible. On the other hand, if any expense is done for the personal use of the owner, then it is not tax-deductible.
You cannot mix personal and business expenses, and even if you do, it in no way means that you’ll get a full claim for business expenses. It also includes taking the client out or buying them gifts. If you ever have a doubt, you should immediately contact the tax department or your accountant.
Introduction of funds
There’ll be times when the owner employs personal funds for business reasons. These must be included in the bookkeeping system of the business. You can do so via bookkeeping journals. It will be beneficial as all the expensed would be claimed. Hence the tax amount to be paid will also be less. You should share the receipts and the invoices of the expenses with your bookkeeper to help him keep a tab on it.
Suggested Read: 6 Things To Know Before Choosing Right Bookkeeping Service
3. Apply Automation As Possible
It is no doubt that automation can be a life saviour for small business proprietors. The more you automate your business, the more time there will be for your business. To streamline your accounting liabilities, examine automating your accounting method with accounting software. You can say get rid of managing spreadsheets and manually munching numbers with the accounting software.
When seeking accounting software, watch for things like storage, access, and security. It is good practice to create a list of things that are necessary for your business, such as special features, pricing, and reports. Do not hurry into buying software. Do your study properly to find out which software would be best suited to the needs of you and your business.
4. Maintain Accurate Records
Creating and maintaining accounting records such as business invoices, receipts, and expenses can build or destroy your business books. If in case you will fail to keep accurate records, your company’s financial condition may suffer. If you are a follower of paper records, store them in a safe and secure place (eg, a locking filing cabinet). And, be sure that you have your paper accounting records organized using various labels and sorting strategies (eg, sequential order).
If you are not a follower of paper records then choose electronic instead. You can easily hold paperless versions of accounting information on your personal devices or also keep your data in the cloud for protection. To ensure you protect your accounting records, consider keeping both a paper and paperless version. That way, you have a backup in case accounting information is destroyed, misplaced, or lost.
5. Set Prompts For Deadlines
For a diligent business owner, it is very natural to lose a record of time and miss deadlines. As you know it, another month or year has passed. To avoid missing deadlines and manage your books ready as tax season approaches, try to set reminders. Add business tax refunds and other reminders to your calendar to make sure you don’t miss upcoming dates. You can also use a digital record like Google Calendar to follow important dates and installed reminders.
Plan advanced, and schedule time and money for your business taxes. In this way, you can pay your tax liabilities on time and clear the time-related penalties.
6. Keep A Private Eye On Accounts Receivable
If your customers do not pay on time, the cash flow of your business can dry up rapidly. Note that when your receivables are due and contact late-paying customers, pair them together. Even if a customer is having a financial problem, you may be able to set up a payment plan to get at least something.
7. Do A Quarterly Review
At the end of every quarter, get an in-depth inspection of your bookkeeping and accounting reports. Study for aims such as increasing or decreasing sales, year-by-year income, or growth in late-paying customers. Consult to your accountant, He can help you see the big picture, so you are better prepared for future capital requirements like purchasing new facilities or relocating to a bigger spot.
So, these were some important bookkeeping tips for small business owners that will help while doing bookkeeping, and also help to grow business.
If you still have any issue and query or seeking an accountant or Bookkeeper for your business then contact us on our toll-free +1-855-441-4417 and get expert advice from our Intuit certified ProAdvisor.