Are you a small business owner? Do you want to stay on top of your financial records? If so, bookkeeping is an essential part of the process. With proper bookkeeping, you will be able to record and report your business’s financial position and this information can be used to decide how to manage your finances. Interested to learn more? The following are some simple bookkeeping tips that every small business owner should know.
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Simple Bookkeeping Tips
1. Choose Suitable Software
Specialist software isn’t always necessary. However, as your business grows, you will find it difficult to keep track of every expense and even minor tasks will become overwhelming. One of the most common small business accounting mistakes is simply having a process that isn’t best suited to the needs of the business. When starting out, a simple spreadsheet will be enough. Ensure that you have your records securely stored elsewhere in the event that a file becomes corrupted or there is a problem with your hardware.
Cloud backup is an easy solution and also makes your data available wherever you are. When the time comes that you need a system that’s more professional, you can consult your accountant and find out which software he/she would recommend. Keeping accurate records is the most important part of bookkeeping and software will reduce the risk of errors. Doesn’t that more than make up for the cost investment?
2. File Bank Statements and Invoices in Order
Keeping things in order will not only simplify the whole process, but it will also save you money if you are employing a bookkeeper. They will have to spend time putting everything in date order and you will be paying them to do so. Not keeping invoices and statements in order increases the possibility of loss and, consequently, could lead to trouble with tax authorities if you do not declare certain information.
Ensure your purchase invoices are sorted into those that are paid and unpaid. For invoices that are owed to you, you should create a filing system such as numbering them in sequence so that you are able to easily chase up any outstanding amounts. Having a process for filing will make everything easier, so also ensure that everyone involved is on the same page with the filing methods you are using to avoid any costly mistakes.
3. Consider Outsourcing as Your Business Grows
As your business grows, the process of bookkeeping may become too much, as it can be time consuming. You will also have far more financial information that needs to be kept in order, which increases the risk of errors. If this is the case, you should consider outsourcing your bookkeeping. You will be employing a professional and creating time you can better use on other areas of your business.
Like with specialist software, this will be an expense and if you are just starting out or money is tight, you can consider taking out a personal loan from a private lender to keep your financial situation in order during the early stages of your business’s growth. When it comes to financial information and adequate filing, hiring a professional is a more efficient solution. You can outsource to a freelancer or hire an in-house bookkeeper who will work with you to ensure all records are up to date and easy to retrieve if necessary. The money you spend on wages will be more than worth the cost investment when you start to realize the benefits of having everything in order.
4. Be Strict with Deadlines
Being strict with deadlines means you have to be strict when filing and paying but also you need to be strict with your clients. If you are not, cashflow could become a problem. Aside from the issue of money, you will also be wasting your time constantly chasing up clients who are not paying when they should be.
If a client continues to be problematic, you should stop working with them. The behavior of your clients and customers will have an impact on how and when you store records. For your business, you need to keep to any deadlines that are set for producing your financial statements and invoices. Failure to do so could lead to fines or bigger penalties. A large part of keeping within deadlines is to ensure that your bookkeeping records are easily accessible and in correct order.
5. Keep Records of Your Expenses and All Payments
Keeping a record of every single payment will make everything easier when it comes to keeping all your information in order. As soon as a payment is made, you should file it in the correct place. This is vital for when your accountant needs to see any records, but it will also make your business run in a much smoother way.
You may also need to refer to them if there are any queries from a client. Your expenses will also need to be filed immediately for tax purposes. This will include any claims on expenses made by your employees. You must also keep your personal expenses separate from your business expenses. It might seem obvious, but when running a small business, it is easy to make the mistake of confusing them. Not separating them could also have an impact on the amount of tax you are paying.