Bookkeeping and accounting are some of the most important aspects of any business. But most small businesses fail to bring in a system for account and finance handling. It is critical to note that without tight books, doing taxes will be a nightmare.
At the same time, if you have the logs of deposits, purchases, and invoices, you will benefit from the time required to do the taxes. Moreover, you could avail the returns from the IRS or your country’s agencies that collect taxes and administer businesses.
That said, here are seven valuable tips to help small businesses with bookkeeping. Using these practices, small and medium business owners can keep tabs on their finances and prepare good financial records.
1. Have a Food Financial Advisor
The first step that small businesses can take when it comes to good bookkeeping is to hire the right financial advisor. You can find the local financial advisors or accountant by making a quick Google search like Chartered accountants Glasgow. After you have a list, ensure to check their credentials and see whether they will be suited for your business or not.
Most small businesses do not feel the need of a financial advisor for the sole reason that they will have to spend on paychecks unnecessarily. But it is critical to note that a good financial advisor will save ten times the money you will spend on their salary. Yes, the thing about financial experts is they know how to make and save money. And hiring one for your business will help you create and save more money than you do in a typical year.
2. Track All Your Business Invoices
Most small business owners make the mistake of allowing their clients to pay money at their leisure and continue to perform activities for them. But this hurts your business by delaying the things you could do with your money. That is to say if you have the money at the right time. That is why it is critical that you must track every invoice that you send to the clients. And ensure that they clear the payments at the right time. Moreover, you can also bring in practices like fine on late checks and not continue to do business with them until they clear the due amount first.
Yes, good relations are more important for small businesses to succeed. And bringing in the money debate can only hurt the relations. But not having the businesses will not allow you to expand your businesses and bring in new clients. As a result, you should clear to your clients that you need immediate payments once the job is done or the order is delivered. Moreover, you can agree to late clearings when the client is a regular, but that should also be once or twice. You can take the example of big multinational companies — which do not do business by leaving the money to the customer. They charge the amount immediately.
3. Ensure to Have Separate Accounts for Handing Personal and Business Expenses
Small businesses, especially with 1-9 employees, have the same account for personal and business expenditure. Every one of you better understands the things that could go wrong if you mix the personal expenses with the business expenses. This hurts two ways. One is when you do the taxes, you will not be sure which payments to adapt and which to leave. Moreover, you cannot keep track of the payments spent on business activities.
So, if you are someone who does it, ensure to have two separate accounts for personal and business expenses.
4. Build an Audit Trail
Think you are too small for actually getting audited? Well, you cannot be more wrong. The thing about the revenue department is they are good with surprises. So, it is better if you have proper documentation of everything that you show in the taxes. Moreover, building an audit trail is a good business practice.
When you have proper documentation for everything shown in the purchases, you can ensure that you do not have to worry about audits and follow the right business practice. Sure, it will take some time when you go for the proper documentation, but imagine the time and resources you save if there were an audit.
5. Daily Records and Reconcile Bank Accounts Monthly And Review the Books Periodically
Are you one of those business owners who save only one day for the books? It is better to make some time for the accounts daily to ensure that you do not have to spend an entire day doing the accounts. It will take about 15 minutes daily to ensure everything is recorded. Still, most small business owners do not make the time to do their accounts daily.
Moreover, ensure to reserve an hour every week or so to review everything you have recorded and streamline the records for proper taxation.
6. Schedule Every Business Purchase
Copy machine, the new software, or anything else, it is critical that you plan everything and can reserve some cases while ensuring that spending on the tools or services will not hurt your business. This will ensure the cash flow that most small businesses suffer the most. Regular cash flow means that your business will not have problems because of financial reasons. So, you must plan the big purchases.
7. Purchase the Right Accounting Software
Another aspect where most small businesses make a mistake is not using the latest services that could benefit their business. Most accounting software on the internet is free. Moreover, even if it is a subscription-based software, spending a little cash on something that could streamline is the way to go.
There you go! As evident, all these bookkeeping tips are self-explanatory. And as a business owner, you better understand the importance of adopting all these tips and how these can help the financial situation of your business.
So, ensure to bring in these practices as soon as possible and make your system beneficial for your business.