If you dread bookkeeping and accounting, don’t worry! You can either outsource the bookkeeping and accounting services for small business or learn the basics of maintaining books of accounts.
Not many know that when an entrepreneur learns how to keep accounting books for small business, it makes it easier to make vital decisions and minimize preventable financial mistakes.
Good bookkeeping and accounting, i.e., recording your business’s financial information and interpreting it, can better organize your data, files, routines, and workspaces.
In addition, you can better plan things like staffing, supply chain management, business growth, and many other vital financial aspects by listing everything that happened financially in your company.
This article enlists 11 practical tips for seamless bookkeeping and accounting for your small business.
Select the Appropriate Accounting Method
Before you proceed with bookkeeping and accounting activities, you should choose an appropriate accounting method.
Almost every business uses any of three accounting methods, including cash-basis accounting, accrual-basis accounting, or modified cash-basis.
- Cash-basis accounting only records transactions when money is exchanged between two or more parties.
- Accrual-basis accounting involves recording the transactions with or without the exchange of money.
- Lastly, modified cash-basis or hybrid accounting involves implementing accrual and cash-basis accounting fundamentals.
Open a Separate Business Bank Account
According to the experts at the U.S. Small Business Administration (SBA), having a separate business bank account gives companies personal liability protection, preparedness in the form of credit, and purchasing power.
Recording personal and business expenses separately for accurate reporting will be best.
Develop an Appropriate Bookkeeping Database
The next step is to decide how you will organize your business records and keep track of daily transactions. In this digital age, you can use web-based bookkeeping software or cloud-based bookkeeping tools to store your business transactions.
Categorize your transactions
As you start receiving your payments and expenditures begin adding up, you will need to do more than record them.
It will help if you focus on sorting your business’s income and expenditure into their categories.
Leveraging professional business bookkeeping services to categorize your transactions will help you know how much money each category adds to your income or costs at the end of a specific period.
These categories are called journals or accounts, and organizing these categories into a table will provide you with a chart of accounts. Some common accounts that your chart of accounts can include as assets, liabilities, income, expenses, and owner equity.
Prepare a Bookkeeping Schedule
To track your business’s financial performance, having a bookkeeping schedule can help you stay organized and know where your business stands each week or month. A bookkeeping schedule can include:
- Paying your vendors at a specific time every month.
- Recording revenue every week.
- Reconciling bank statements each month.
- Making bank deposits regularly.
You can also look for professional accounting services for small business to create a monthly financial report. When an accountant prepares the report, you should review it for accuracy and know your company’s financial standing.
Invoice Accurately
Invoicing is a vital component of any company, small or large. It’s a significant phase in the business process but can be time-consuming and burdensome.
Minor invoice errors can impact your capacity to get paid by your customers. The invoices you generate must include all pertinent transaction details and be delivered to the customers on time.
To accomplish the same, it’s advisable to get the help of trustworthy Business bookkeeping services.
Ensure Your Chosen Accounting Method Pays Bills and Invoices on Time
If your small business deploys accounting software, it can help you automatically track when invoices are due.
Moreover, most accounting software applications provide options for automatic bank transfers or paying bills. If you don’t use such software, consider setting the payment method and the time to make monthly payments.
Keep an Eye on Accounts Receivables
Your organization’s ability to survive and perform competitively depends on your account receivables. It’s essential to check whether your customers pay their invoices on time if you want the money to keep coming into your company.
Ask your bookkeeper or accountant to build an efficient invoicing system and a solid internal structure to get paid on time. An efficient invoicing system can help you track, maintain, and receive regular alerts about unpaid invoices.
Create a Budget to Meet Business Goals and Objectives
Another critical tip for a seamless bookkeeping and accounting process in your small business is to prepare a budget, entailing expected income and expenses. Creating a budget will help you establish a baseline for what you must work on to meet business goals and objectives.
Small businesses with an accounting budget can optimally allocate resources, make better decisions, monitor achieved results, and plan the company’s future.
Keep Your Accounting Books Updated
In addition to recording and sorting your business transactions, you should regularly check whether your accounting books are updated.
Having well-organized, updated accounting books can provide insightful knowledge about your business and, thus, help simplify business and financial planning.
Get Legal Help for Tax Preparation
Professional Accounting services for small business can help you stay updated on all the modifications and changes, simplifying tax preparation.
Qualified accountants will know how to keep books for small businesses and help owners understand their responsibility to pay necessary taxes.
It’s possible that depending on your business model, industry, and state of operations, you don’t have to pay tax. Your accountant can guide you on what compliance looks like for your business and help your company adhere to necessary tax-related regulations.
Wrapping up it all!
Carrying out bookkeeping and accounting activities in any business can be challenging. Even small businesses, regardless of their size, pose a challenge because of the difficulty in keeping track of expenses, revenue, bills, and invoices.
Now that small businesses are often a single-man show, bookkeeping and accounting can be pretty tricky for one person to handle.
Following the above-discussed tips and working with reliable Business bookkeeping services can help small entrepreneurs better manage their company’s financial aspects.
Outsourcing vital bookkeeping and accounting tasks can save you time, money, and effort that you can use for other critical business functions.
