As a business owner, you have a lot to do. From managing your day-to-day operations to collaborating with clients, you have to keep everything running smoothly.
In the meantime, it’s hard to find time to look through financial spreadsheets, analyze the numbers, and manage cash flow.
Are you facing similar issues? Here, we have compiled the best tips that could be detrimental to your business. Once you trade clean books, you will reap the benefits that come with them.
Below are those expert bookkeeping tips you are looking for!
Keep Business and Personal Accounts Separate
This is the golden rule of accounting. Unfortunately, it is one of the most broken rules. Even if you are self-employed, keep your personal and business accounts separate.
By removing all personal transactions from your business accounts, you significantly reduce the number of transactions your bookkeeper has to categorize and reconcile.
Perform Checkup Quarterly
At the end of each quarter, take a closer look at your accounting and bookkeeping to spot both positive and negative trends.
- Ask yourself these questions:
- Do you have customers who pay late?
- Is your income increasing or decreasing?
- How do you compare finances to the same quarter last year?
If necessary, meet with your bookkeeper to go over the numbers. Regularly looking at the big picture will help you prepare for future financial needs.
For example, if sales are increasing rapidly, you may need to hire more staff or purchase new equipment that may require financing. The earlier you plan to raise capital, the easier it will be to get it when you need it. So, think about it at an early stage.
Automate your Accounting with Software
Cloud-based accounting software gives you the ability to access your business information at any time. Today, cloud-based software does most of the hard work for you. That’s why automation is going more popular day by day.
What can this software do?
- Automatically invoice customers on the correct due date
- Track your incoming and outgoing expenses
- Generate reports on your cash flow.
There are many software options available. If you are not sure of the right option contact an accounting expert, such as Bit Accounting, for advice.
Record Cash Expenses
For every business, proper record keeping of cash expenses is essential. Keep track of all expenses related to your business. That way, these expenses can be deducted from your total income when it comes time to pay taxes.
This will give you a more accurate idea of your total return for the year. It’s easy to see beyond cash-paid expenses.
Have you outsourced your bookkeeping? If yes, ask your provider for a receipt or record expenses to ensure they’re on the books.
Know Double-Entry Bookkeeping
Most businesses these days use accounting software instead of physical ledgers. However, the accounting advice behind double entry still applies. The basic idea is that every time you make a purchase for your business, record not only the expenses but also the income from the transaction.
For example, if you bought a chair for $150, you would enter a negative amount of $150 on your balance sheet. But with double-entry bookkeeping, you would also write plus 150 for the inventory gain.
Unless the money you spend is actually lost, this type of accounting is the best way to show where your money is going. So you can make the best decisions for your business.
Don’t know more about it? Ask your provider to help you understand it.
Pay Salary to Yourself
C-Corps and S-Corps owners must pay themselves a reasonable salary and run it through the payroll system like any other employee. However, self-employed personnel, freelancers, and partners also pay themselves a ‘salary’.
Technically, they are the owner and not included in the payroll, but it will help you later.
Paying yourself a salary reinforces the idea that your company is a separate entity and reduces the need for you to break the golden rule by having your company pay your personal expenses directly. Instead of numerous transactions throughout the month in which the company pays an expense on your behalf. write you one check a month. Now, deposit into a separate personal account you have for your personal expenses.
If You Are Not Doing It Well, Outsource Your Bookkeeping
Cloud-based accounting systems like QuickBooks have made it easier for businesses to manage their bookkeeping without too much hassle. However, that doesn’t mean you shouldn’t hire a professional bookkeeper. Benefits of outsourcing bookkeeping include:
- Time-saving by ensuring your books are always up to date and organized.
- Money saving by fulfilling all your compliance activities, including tax obligations.
When your books are organized professionally, they will help you make important business decisions. With this, you will have a clear picture of; How is your company performing financially?
Input Your Transactions Weekly or Monthly
With full support, enjoy your bookkeeping to a certain extent. Continue to work with great potential and proper record keeping as long as possible. If you work accordingly, you will also reduce the likelihood of task failure.
Don’t put your work on the next day, week, or month. If you do this, you will fall into one of the biggest traps. This means you are putting your books back and increasing your workload. Spending 20-30 minutes doing something you don’t like is fair enough. Because spending an entire day or more catching up seems unbearable.
If you don’t like some tasks, do them in small bites. Enter your transactions monthly or ideally weekly. It takes very little time. But you will actively manage and track your finances. Hence, you will keep work from piling up on you.
Stay on top of your Business’s Receivable
Customers who default on payments can quickly eat up your company’s cash flow. It is therefore essential to pay attention to the due date of your receivables and act immediately when they are due.
Contact customers who are behind on payments immediately to see their payment and when you can expect to receive the money. If the customer is in financial trouble, see if you can work out a payment plan to get some of the money owed.
Bookkeeping requires both knowledge and consistency. You must learn the basics of good bookkeeping and apply these principles. It also helps to have a solid system for managing your finances. Integrate your payment processing solution with your accounting software to ensure payment data flows seamlessly from one platform to the next, eliminating the need to worry about additional manual and human errors.