Don’t fancy working with numbers and bookkeeping much? Consider cultivating these practices as growing pains you must bear to grow your brainchild.
Plus, a strong accounting function can add tremendous value to all businesses, no matter the size of operations.
According to financial experts, an entrepreneur’s financial literacy. Such knowledge of accounting concepts plays a critical role in determining their survival. Besides helping you understand your business’s cash position, bookkeeping lets you stay on top of tax deadlines, including filing for returns.
Contrary to popular belief, bookkeeping doesn’t revolve around a stack of receipts and invoices, but bank and credit card statements. A bookkeeper’s job is to record all your bank and credit transactions and then reconcile your books with your bank statements. By doing so, they can assess if the amount of all your transactions measures up or not.
So, unless you’re capable enough to hire an accountant for your firm, you’ll need to learn the use of accounting tools and bookkeeping fundamentals to ensure your business’s viability. Moreover, your troubles aren’t over even if you employ a certified accountant, as you’ll still need to supervise and keep them in check.
Are you feeling overwhelmed? Don’t be. We have compiled this handy guide to enable you to keep a handle on your business’s bookkeeping.
Lucky for you, formal education is not a prerequisite for bookkeeping. But if you’re up for it, a masters in accounting online can help you skill up while applying your newfound knowledge to your business. If you can spare some time, employ the right tools, and pay attention, you’re golden!
Follow along with the tips in this article to achieve effective and accurate bookkeeping in your business.
Invest In Cloud-Based Accounting Software
First of all, you need to set up cloud-based accounting software for your business’s finances. That way, when you finally get your first paycheck or make a big purchase, you’ll know how to proceed.
Some functions that accounting software provides include bill payment, reconciliation of accounts, and invoice tracking. Anyone slightly familiar with those tasks will agree that they require countless hours and efforts.
Investing in online accounting can eliminate tedious manual work for now and increase operational efficiency in the long-term. Plus, you’ll be freeing up a lot of time you could put into developing and growing your business.
Additionally, accounting software helps keep all your essential accounts and figures under one umbrella for easier and more accurate annual tax returns. Usually, your cloud accounting software is exempt from taxes or tax-deductible.
Balance Your Books Regularly
Next, you need to feed data into the software you just set up, and then you can be on your way to check for any monetary loopholes in your transactions. Fortunately, accounting software makes balancing books and reconciling accounts a total breeze!
A business’s balance sheet is a comprehensive display of all of its liabilities, assets, and equity. This statement acts as the central source of information for all your business finance decisions.
When you’ve ascertained that your expenditure and revenue records correctly reflect in your accounting software, balancing your books will be a piece of cake! If your venture’s size allows you to accomplish this manually, by all means, go ahead. Still, it’s more convenient to utilize the invoicing system that is standard to most software. For expenses, you can connect your business account with the software and easily integrate your HR, benefits with payroll software.
Your accounting software will give you regular reminders for such tasks, so you’re never distracted from the ultimate goals; growing your business and generating profits.
Keep Personal And Business Finances Separate
Another tip for effective bookkeeping is creating a separate bank account strictly for business transactions; this may involve getting separate credit and debit cards.
Most CPAs agree that ignoring this aspect of a business is among the biggest mistakes that startups make. Why? Because when it’s time for filing tax returns, you’ll have to examine a ton of bank transactions to figure out their nature, i.e., business or personal. There’s a high possibility of committing tax fraud even if you diverge a little off track, for example, if you represent a private expense as a business expense. Similarly, you can lose significant tax deductions and returns if you don’t claim a business item you bought with your personal income.
You can do away with such silly mistakes by creating a separate account and getting a credit card reserved for business expenses only.
Track Your Invoices
Your business reputation and cash flows can take a serious hit if you’re behind on your bill payments. Hence, you need to hire someone to track all your billings. Next, put a system in place in case something becomes overdue or unpaid. For instance, you may call the other party, issue another invoice right away, or try leveraging penalties with extra fees at future dates.
Moreover, create a plan for late customer payments. Start with one month, then move on to two, and so on. Use logic instead of emotion in this scenario because allowing late payments means giving clients interest-free loans. Plus, these payments will negatively affect your cash flows and overall capital structure.
Don’t Miss Tax Deadlines
Indeed, small-business owners have a lot on their plate. Many times, one can easily forget about fast-approaching deadlines. One blink and there goes another year!
Try setting reminders to meet all your deadlines with perfectly maintained books by your side. You can even add all the important due dates of tax season to your calendar to guarantee you never miss any future deadlines. Digital calendars come in quite handy when keeping track of important events and deadlines, for instance, Microsoft Outlook Calendar or Google Calendar.
Always plan for tax matters and put aside some time and resources to cater to them. Consequently, you’ll stay on top of your tax liabilities while avoiding deadline-related penalties.
Track Your Expenses
A real challenge for most businesses is keeping track of their expenses, which leads to missing out on potential tax write-offs.
Believe it or not, credit cards can prove quite useful in ensuring the proper recording and tracking of business expenses. The only condition is that you can uphold your credit score with your debt and bill payments. Nowadays, many credit providers classify your bills into different kinds of expenses, freeing you of the responsibility to do so.
To be better equipped for your annual audit, try making calendar notes about all client meetings, including big promotional events and small coffee dates. If you happen to get an audit, this practice can help justify your business expenditures.
The Bottom Line
As an entrepreneur, you can’t get rid of the nuisance of bookkeeping by outsourcing the job. Effective accounting and bookkeeping concern how you organize and run your business. That’s a job reserved for the business owner. This article went over some simple yet efficient bookkeeping tips to keep your small business afloat. These include, but are not limited to, tracking your invoices, meeting tax deadlines, using accounting software, and separating the business from personal. These tips will allow you to keep track of your money, be abreast of the latest technology, maintain creditworthiness, and be compliant with audit and tax obligations.