Did you know that 82% of businesses collapse due to poor management of cash flow? The right bookkeeping can save you from common financial pitfalls facing small businesses. Financial records will allow you to manage your debts, items sold on credit, and deposits, among other critical aspects.
If you don't have a full-time CPA in your small business, learning basic bookkeeping is indispensable. Your accounts are central to your company, and you can't afford to mess around. Yet, some business owners don't know how to go about bookkeeping.
Do you know the best bookkeeping tips that can be ideal for your small business? Keep reading to know how to do bookkeeping for optimal results.
1. Track Your Company’s Invoices Relentlessly
Unpaid and delayed invoices will be detrimental to your cash flow. Consequently, it will hurt your overall business operations. You should have a policy where clients aren't supposed to stay long without paying. While at it, ensure that clients don't take new items if they are yet to pay for a previous order.
More importantly, set strict deadlines for your clients to deal with the issue of late payments.
Penalties should apply if clients default the deadlines for payments. While you might want to impress customers with friendly terms, avoid bad debts as they can cause your business to collapse in no time.
2. Separate Your Business and Personal Finances
Having your personal and business expenses in one bucket might seem harmless. However, it can cause you unimaginable frustrations in the long run. It would help to have a separate business bank account from the onset.
With a business bank account, it will be easier to organize your accounting records and have your finances in order. A separate account will further help you stick to a budget for your personal and business needs. Separating expenses is one of the bookkeeping tips that most upstarts fail to consider until late.
This approach to bookkeeping will enable your business to build its credit rating. More importantly, you’ll save yourself from complex taxation, which will be imminent if you’ve not separated your expenses. You’ll also miss out on significant deductions and tax credits.
3. Automate Your Bookkeeping
Reconciling the numbers manually and inputting data on spreadsheets can take hours, if not days. Don't even mention the errors that you're likely to make! Fortunately, you can save yourself the trouble by considering automation.
With automated bookkeeping, you'll experience the utmost efficiency and still save time. If you've been wondering what to do to get good at bookkeeping, getting the best accounting software is the solution. The right software has a host of capabilities and features that will make your bookkeeping enviable.
Software options are endless. Avoid rushing to purchase software before carrying out your due diligence. The software you buy should fit your business needs, without compromising features such as security, accessibility, and storage.
4. Review Your Business Books Weekly
Most upstarts might find it overwhelming to review the books regularly. Given that you're in charge of operations, you’ll be tempted to forfeit checking your books. A weekly review of your books will help you understand your business, and any necessary changes in cash flow management.
Checking your books weekly gives you insights to evaluate the income and weekly expenses. You'll further note any arising issues. Some of these issues can be catastrophic is not handled immediately, which can only be possible if you identify them sooner with the weekly reviews.
A weekly review is amongst the bookkeeping tips that don't necessitate major skills. The income and expenditure are clear, and you'll only need to note the trends. Account recording in your business will only get complicated if you're checking your books after several weeks, where the income and expenses are quite humongous to comprehend.
5. Track All Essential Reports
While every part of your business accounting is critical, there are some essential reports that you need to pay particular attention to. The balance sheet is a report that shows what your business owes against what you have. Check the balance sheet regularly to ensure that your debts are not overriding the income.
The income statement is another crucial report that you need to track if you're wondering how to learn bookkeeping. The report shows the revenue, which are the assets your business got, and the expenses within a specific period. It can be either monthly, quarterly, or annually.
The cashflow statement almost acts like an income statement as it shows the cash that comes in your business. However, cash flow is solely about money, while income statements incorporate even non-cash accounting, such as the depreciation of equipment.
6. Outsource Bookkeeping Activities
About 68% of companies that outsource their accounting to professionals report that they have efficient and easier accounting. In fact, 79% are confident with their accountants that they would refer them to others. If you’ve been too busy to integrate the best bookkeeping tips, outsourcing the service will help.
Outsourcing will promote accuracy as your accounts will be under a professional. Besides, it is quite cost-effective as you’ll be paying for some hours, instead of regular wages that you’d pay your regular worker. An expert in bookkeeping will likely take less than four hours to process your monthly accounting.
Bookkeeping professionals often prepare sale invoices, bank reconciliations, sale reports, creditor reports, taxation activities, and advise you on your company's finances. Given the high number of accounting firms available, it would help to vet each option critically to ensure that you settle for the best.
The Right Bookkeeping Tips Are a Resource for Your Small Business
Tracking your income and expenses for your small business is crucial. Considering that most small businesses often struggle with cash flow management, you'll be able to incorporate some of the best bookkeeping tips. You’ll have an easier time managing your finances.
Good bookkeeping will set your business apart from many startups. If you’re still wondering how to learn bookkeeping, incorporating the tips will elevate your business accounting to another level!
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