Business owners‘ personal scorecards are based on their bookkeeping practices. Numerical data reveals your accurate profits or losses and gives your business results a quantifiable shape. You can save money, time, and nerves by keeping your books correctly.
To assist you in developing an effective bookkeeping strategy, here is a list of 10 smart bookkeeping tips for a small business:
1. Keep business and personal finances separate
Not doing so would only add to the chaos. Spending money when your business is just getting started is appealing. You can also get a business credit card issued to you for personal expenses- for example, to collect Avios points.
Always keep business and personal finances separate.
- It will leave you with a clear picture of the business and personal finances;
- It will save you bookkeeper’s hours;
- It will minimise the risk of missing any claimable expenses; and
- It will minimise the chances of an overdrawn director loan account.
Check our blog post on : Guide to Bookkeeping for New Business Owners.
2. Consider automating your workflow
Initially, bookkeeping was a time-consuming, difficult task. In the past, accountants and bookkeepers had to do everything by hand, but things have changed dramatically in the last decade- thanks to technological advancement and cloud computing.
AI technology and automated software have made bookkeeping easier than ever before. Manual spreadsheet creation is no longer necessary. Software that automates bookkeeping makes our lives more convenient.
Check our blog post on : Best Bookkeeping software for small business a comparison guide
3. Make sure you’re aware of your deadlines
Even the most critical deadlines can be missed when you’re stressed out about taxes. Define all deadlines and responsibilities before starting anything new.
Your small business will run more smoothly if all the critical dates are visible.
In addition, failing to meet deadlines or fulfilling your obligations on time will only lead to legal problems. Some people still prefer to write them down on paper.
Whether you write on paper or save in notes in the cloud or set up tasks in project management tools like Asana, Monday.com or Jira, it’s essential to know your deadlines to plan and increase revenue.
Check our blog post on : Funniest Excuses for Not Filing a Tax Return on Time.
4. Make a list of major expenses and budget for them
Think about the expenses that could arise in the next one to five years, and be honest about them. What are the chances of having to upgrade your facilities? If so, it’s time to replace them.
It’s essential to be aware of your company’s seasonal ups and downs and how they’ll affect your ability to spend during those times of increased or decreased revenue.
To avoid draining the company in good months and running out of money during slow months, make sure you’ve budgeted for significant upgrades or spikes in staffing costs.
Check our guide on : Top 25 Small Business Tax Deductions.
5. Monitor your cash flow
Cash is still the king in 2021!
Understanding the numbers increases your chances of successfully managing a business. Consider creating a cash flow statement to keep tabs on income and expenses. As a result, you can see payment cycles and seasonal expenses.
Using cash flow budgets, you can better predict expenses and allocate income. Some businesses have their prepared weekly and others on a quarterly.
Do what best works for your business, but always pay close attention to the cash flow. Often it will act as an early warning system for any potential problems.
6. Receipts and Invoices: Know the Difference
Mistaking invoices for receipts is a common mistake small business owners make.
Customers receive an invoice after receiving your services. An invoice serves as a reminder to your customers that they owe you money and should pay it.
Receipts are evidence that a transaction has taken place. Your customers will receive it after a transaction is complete.
Having receipts and invoices mixed up can be a nightmare for accountants. There will be a lot of trouble balancing your books if you have no idea what’s complete and what’s in progress.
7. Save important documents
Documents like payroll and inventory management should be kept for tax and other business purposes. Scan and save important documents such as bank statements, cancelled checks, receipts, and bills when in doubt.
Bookkeeping records can be easily stored on your computer by making digital copies and saving them in designated, password-protected files. Consider investing in an old-fashioned file box to keep in your office if cloud storage isn’t your cup of tea.
Just make sure that your storage system is secure and protected from the elements in either case.
8. Organise your bank reconciliations on a schedule
You can see how closely the bank statements and your accounting records match up when you do bank reconciliation. Keeping track of your company’s cash flow and how much liquid capital you have at any given time is critical.
9. Hire a professional
To save money, many people try to do bookkeeping on their own.
Professionals know what they’re doing, and they’ll use their knowledge, skills and experience to put your books in the best financial situation possible. You can count on them to be up-to-date on the ever-changing laws.
10. Keep in touch with your bookkeeper
Accounting and bookkeeping jargon can be difficult to understand when working with other professionals. There’s no need to keep up with the latest financial industry technical jargon.
Consider your bookkeepers and accountants as members of your team and not as separate entities. Bookkeepers should be on your side, keeping an eye on your back and providing you with bookkeeping tips you can rely on.