As a small business owner, you may have avoided engaging professional bookkeeper services to cut costs. However, getting it right yourself can be a headache, especially if bookkeeping is just one of the many other tasks you have to manage in order to run a successful business.
If you’re struggling to keep on top of your business finances, here are 10 great tips for better small business bookkeeping that you can implement to help you save time, cut costs and run a might tighter, more profitable ship.
1. Keep Your Business Income And Personal Finances Separate
The first thing you should do upon starting your business is open a bank account for it.
Using your personal bank account for business transactions is never a good idea. Doing so means that both your personal funds and business funds are shared and (you or the person providing your bookkeeper services) will end up having to spend more time processing them both to separate business income and expenses from your personal ones
Mixing up your personal and business finances might also cause you to pay more taxes. To avoid these inconveniences, make sure you set up a seperate bank account and use it solely for business transactions.
2. Invest In Automation
There are lots of software options out there that can help to take a lot of the hard work out of your bookeeping. Many of them also allow for integration and automation to make things even easier.
Do your research, find one that suits your business and make use of it. Most of them don’t cost a fortune and are straightforward to use. For small businesses, automating your bookkeeping is a cost-saving and efficient solutionthat can allow you to spend more time focusing on your business.
3. Do Regular Check-Ups
This is a time-saving tip to prevent you from headaches that are unavoidable when your books don’t tally when its time for an audit. Whether daily, weekly or monthly, set aside some time to verify all entries into your books and make sure they balance.
4. Perform A Quarterly Review
During a quarterly review, you’ll have the opportunity to analyse all of the financial activity carried out during the previous quarter. This allows you to take stock of where your income is coming from and how your money is being spent, allowing you to identify unnecessary expenditures and cut back on them to achieve better profits.
5. Keep Track Of Your Cash Payments
Every payment you receive should be recorded in your accounts receivable before you choose to spend it. This includes cash payments.
While it can be tempting to immediately use the cash received for expenses, there are some unwanted scenarios that can occur if you do so without making an entry into your bank account or petty cash, such as:
- You might forget the customer you received payment from and double-invoice them (which can cause complaints and bad customer relationships).
- You might forget to record your expenses that were made with the cash payment (This will result in higher tax rates).
The above scenarios are results of poor bookkeeping which don’t accurately reflect how your cash was handled. This defies the purpose of bookkeeping and leaves you with additional problems to solve. It can also negatively impact your business.
6. Be On Top Of Your Sales Invoices
Late payments can hurt your cash flow, so the best way you can avoid them is by sending an invoice immediately after a sale. If you offer your customers a credit payment option, there are high chances that the payments will not be made in a timely manner.
Consider setting up a process to remind your customers of any late payment. For instance, upon sending your customer a sales invoice, give them a call if you have yet to receive it after 10 days.
If late payment is a constant issue, you might also want to establish late payment fees in your customer agreement to give people an incentive to pay in a timely manner. This can be especially useful for B2B operations.
7. Record All Your Business Expenses
Not only is this in an important step in ensuring that your books balance, but it is also necessary to prevent paying higher taxes than you actually should.
Having accurate records gives you a true reflection of how your finances are being managed and it also allows you to maximise your tax deductions.
8. Stay Ahead Of Tax Deadlines And Obligations
Taxes are daunting for any small business owner, but being prepared helps you go through it with ease. You’ll have to pay your taxes on time to avoid getting fined, so set aside some many to ensure you have sufficient funds to cover your tax obligations.
9. Stick To A System That Works
Whether you choose to outsource your bookkeeper services or do them yourself using bookkeeping software, find a system that works for your business and stick with it. The most important thing is that your books balance and show an accurate record of all your past financial activities.
10. Outsource When It Gets Too Much
If you do things right and continue to grow, there will come a point when your DIY bookkeeping practices will no longer suffice.
When that happens, you can choose to hire a qualified accountant to manage your books. Alternatively, you can outsource your bookkeeping services to professionals and let them take care of it at a fraction of the cost.
It’s all about finding the right solution for you at the right cost. Continuing to manage your own bookkeeping can detract for your other efforts and cause more stress and work at a vital time when your business demands your full attention in other areas.