The biggest challenge for a small business owner is to understand the fundamentals and the odds and ends of their business. This article will educate you about bookkeeping tips to maintain a healthy business.
Whether you like it or not, you become all sorts of departments once you enter the realm of entrepreneurship— financing, operations, marketing, you name it. If you are a start-up entrepreneur, then you should know by now that all of these are at the palm of your hand— even bookkeeping.
From financing tips to marketing tips, the internet has provided us the help that our businesses need to flourish. Here, I’d like to talk more about bookkeeping tips— something often overlooked yet truly necessary.
Owners always see bookkeeping as the necessary evil of business. You have to decipher month-old receipts, jot down all the financial affairs into columns, and balance the books. That sure sounds like a pain in the neck.
Sure, it may not be your favorite Monday morning activity. If bookkeeping were a person, you would probably cross the road by all means to avoid its presence. However, bookkeeping doesn’t have to be a struggle. With just a few bookkeeping tips, good tools, and a positive mindset, you will realize that it is not as hard and as time-consuming as your mind constructed it to be.
5 Bookkeeping Tips for Small Businesses
1. Separate business and personal accounts
At first, your best option must be to use your pre-existing bank account for your business. Sure, doing that means one less transaction and one less trip to the bank. But in the long run, it may cause both of your business and personal finance to suffer.
If you opt to conjoin these two accounts, you might experience problems like unorganized accounting records, inaccurate tax filings, lack of growth opportunities, and overspending.
To avoid such blunders, the best trick is to open your separate business account. In this way, you will have your clean records as well as a clear audit trail.
Read: 4 Common Mistakes Made By Start-Up Entrepreneurs
2. Organize your files: the practical bookkeeping tip
Staying organized is the secret bookkeeping tip for accurate bookkeeping. Organizing your files means deciding what to keep and maintain a specific order based on priority level. If you are settling for manual bookkeeping, you must know the different methods for storing hard-copy information.
-
- Folders: use folders to file invoices, payment, and contact information of your suppliers; employee information such as payroll; and individual customer accounts.
- Expandable folders: use an expandable folder for outstanding bills, pending vendor invoices, and purchase orders.
- Three-ring binders: for the chart of accounts, journals, and ledgers, you should store them in a three-ring binder. Always keep a hard copy of these files even if you already have a copy on your computer drive.
Read: 5 Business Tips for an Unbiased Decision-Making
3. Automate the processes
If the thought of organizing a stockpile of papers burns you out and you want to save trees, the best option for you is to use bookkeeping software. Gone are the days of manual bookkeeping transactions because technology has already paved the way for you.
QuickBooks is one of the best bookkeeping software available in the market. It makes keeping track of expenses, profits, and sales way easier. With QuickBooks, information is more accessible across all of your devices thanks to cloud storage. Plus, you can say goodbye to your shoebox full of receipts because this software has a receipt capture functionality.
Read: 5 Cash Flow Tips to Avoid Bankruptcy in Your Small Business
4. Monitor your cash flow
To stay clear of possible cash flow problems, the first bookkeeping tip is to learn the importance of cash flow. Cash flow is the inflow and outflow of your money. What makes it important is it becomes the payment for all the expenses that make your business run— operational expenses, rent expenses, and employee salaries. Along with expenses management, your cash flow indicates the capabilities your business requires to invest in growth.
After knowing the importance of cash flow, you must understand its fundamentals. For the most part, cash flow is comprised of three basic components: operating activities, investing activities, and financing activities. Expanding your knowledge regarding these components will enable you to evaluate the financial health of your business.
Once you learn all the basics of cash flow, it is time to monitor your cash flow. Focus on your current financial situation, while also paying attention to patterns, like how long clients pay their bills. If problems surface, you must be able to pinpoint the cause so you can work on them immediately.
5. Plan ahead for tax season
Tax season sure is the nightmare after Christmas. But then, it is something that you must face head-on and well-prepared.
To prepare for the dreaded season, another bookkeeping tip for you is to keep accurate records of spendings and expenses. This will increase your chances of claiming deductions. Be sure to set aside funds to cover your tax payables, and always stay on top of your deadlines.
Now that you know the 5 bookkeeping tips, it’s time to execute it and maintain a healthy business.
Read: 5 Mistakes Every Entrepreneur Must Avoid When Scaling a Business