Your small business’s books are like scorecards of your business’s financial status. However, if numbers are not your thing, bookkeeping might not be one of your top priorities. But as a responsible business owner, you should know the basics at least.
Regardless of your feelings about bookkeeping, it’s just one of those activities that you can’t avoid. To help you out, here are easy tips to make bookkeeping easier and more efficient.
Embrace Automation
Going to the bank, using standard spreadsheets, and manual calculations are things of the past. These days, you can do most of your banking tasks online and opt for simple, easy-to-use, but robust bookkeeping software to help you with your bookkeeping tasks. You can even sync your chosen software with your business’s banking account to ensure that your records are always updated and accurate.
Never Mix Your Personal and Business Finances
Co-mingling income and expenses is a surprisingly common mistake that many business owners still fall prey to. But this one innocent mistake would cause you stress, hassles, and legal problems later on. You should have a dedicated bank account for your business, including a credit card. Besides separating your personal and business finances, this will also help in building your business’s credit rating.
Review All Your Accounting and Bookkeeping Records Quarterly
Look for trends like declining or increasing sales, yearly revenues, or a decrease of increase in late customer payments. For these quarterly reviews, your accountant can help you see the bigger picture so you’ll be more prepared for capital needs later on, including moving to a new location or investing in new equipment.
Pay Close Attention to Your Accounts Receivables
Your cash flow could dry up quickly if your customers always pay late. Keep track of your receivables deadlines and remind them of their obligations. Also, try to help your customers whenever possible. For example, you can consider setting up a customized payment plan for a customer who’s having financial issues so that you can at least obtain some money for that unpaid batch of wheelchair lifts from your Utah location.
Every month, check the total and percentage outstanding revenue amount. In general, your unpaid accounts receivables shouldn’t be more than 15%. Reach out to late-paying customers once a week to firmly remind them of what they still owe you.
Record and Keep Track of Your Business Expenses
Ask your accountant about which types of expenses you could deduct for the next tax year. Keep detailed records of anything that you might be able to claim. You can ample time by digitizing and scanning receipts. Additionally, you could further simplify expense tracking when you use your business’s credit card for all your business expenses.
Always Be Prepared for Tax Season
It’s great business sense and just practical to always plan ahead for tax season and setting aside funds for unexpected tax bills. Always pay on time to avoid hefty fines. You can also consider syncing your business computer’s calendar with the tax calendar from the IRS website to help ensure that you don’t miss deadlines.
Conduct Financial Checkups Regularly
Ideally, you should review your books at least once per week to ensure that everything is in order. Putting off bookkeeping for too long could result in you ending up with figures that don’t match, overdue invoices, and bounced checks.
Bookkeeping might not be your favorite part of being your own boss, but it’s a crucial one. Errors in your books due to sloppy bookkeeping or lack of it could definitely endanger your business. That being said, if you’re really not cut out for bookkeeping, you can always hire one and ask your accountant for things that you don’t fully understand.
