Bookkeeping for Small Businesses is extremely important. So, here, we have come up with crucial 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
First – Keep your personal and 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.
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.
So, these are the important bookkeeping tips that you should keep in mind.