If you own a company, then you understand the importance of managing your finances. To achieve this, you will need to bookkeeping financial transactions as and when they occur. Using the right accounting knowledge and tools is sure to make you confident. You will also know when to pay taxes and what amount to pay. Thus, you can be aware of your business earnings and understand where the money is going. It allows you to focus on business growth and make accurate decisions.
About Small Business Accounting
It involves maintaining accurate business transactions. Maintaining copious financial records provides information on how much a business is losing or making. You can also know your expenditures and track them properly. Be it a double-entry or single-entry bookkeeping system, you can easily know your business’s financial standing.
Essential Bookkeeping Tips for Small Businesses
1. Select accounting software to match your business needs:
The first thing to determine when selecting accounting software will be how to use it, including the features required. Consider the number of users and the cost factor. If you desire an in-house payroll, seek a software program that works perfectly for your business type. Will your business generate cost estimates, invoices, or bill statements? In such cases, seek software that can prepare statements. Tax preparation and inventory tracking programs can streamline business operations. If using other software applications, seek accounting software that can be integrated with such applications.
2. Account method:
Small business accounting involves two primary methods, namely, accrual and cash-based. The latter is stated to be simple to use; however, it is not meant for all small business owners. Find out the difference between accrual and cash accounting and restrictions. Cash-based accounting is quite simple and is used in businesses not involving inventories. It is also meant for short cycles. This method offers a short-term look at a company’s financial health. Accrual-based accounting records income on billing and not when received. Income will be recorded after invoice generation. It offers a broader financial picture.
3. Bookkeeping schedule:
A proper accounting system will enable proper maintenance of financial transactions and staying organized. You can also know your current business standings every week or month. The schedule may include paying vendors at a particular time each month. It also involves scheduling regular bank deposits, recording revenue weekly, and reconciling bank statements every month. Generate a financial report based on business books. This should be at the month’s end. Financial reports are generated automatically using accounting software.
4. Track and record all expenses:
It is your responsibility to record all expenses made from the business account. Whatever payment method is used, it is necessary to record all business transactions with the date, purpose, and amount.
5. Maintain separate business and personal expenses:
The first step to undertake when launching any new small business is to open up a checking account. Do not mix personal and business funds for any reason. Deposit tax obligations into a savings account. You may use different banks to eliminate potential confusion.
6. Ensure accounting methods pay timely invoices and bills.
Using accounting software, small business owners can easily track the due dates of invoices. Software programs offer options to perform automatic bank transfers and bill-paying. If you are not using the software, then establish a time every month to make payments and the payment method used. Vendors can pay online or mail a check.
7. Establish a filing system:
You have the option to store files on a cloud or computer, maintain them physically, or even use both! You do have a computer backup, ensuring two versions of vital documents exist if anyone is corrupt. Choose a filing system to maintain hardcopy records. This should provide easy access to the desired information. The physical filing system should have clearly labeled folders, with most used files being easily accessible.
Following the above bookkeeping tips will allow you to streamline your finances and achieve tremendous success.
