Running a modern business without even basic bookkeeping is unimaginable, but taking care of your financial transactions, expenses, income, and similar aspects calls for proper skills and tools that take time to learn.
Luckily, you have plenty of solutions at your disposal to make wrangling your business finances one of the easier parts of running your business. Understanding these solutions will help the financial health of your business.
Small, mid-size, and large businesses all depend on some form of bookkeeping, the recording, sorting, and classification of financial transactions in a business.
Bookkeeping can be daunting, especially if you’re not familiar with how it works. It can be challenging to keep track of all terms related to bookkeeping for small businesses in-house. This can be especially daunting if you’re not already a bookkeeper or certified public accountant.
Consider these account types, for example:
An asset is anything that holds value in your business. This can be bank account funds, accounts receivable, inventory, furniture, computers, etc.
Business debts are considered liabilities. This can be your accounts payable balance (what you owe to vendors) or your business loans.
Subtracting business liabilities from business assets introduces equity. This is the reflection of the financial interest in your business.
Expenses for a small business can include electricity, salaries for employees, equipment, work lunches with potential clients, etc.
Revenue or income is the money you earn in your business through selling services and products.
Apart from these terms, it’s crucial to have an understanding of debit and credit before entering any transactions. Depending on the accounting type you use (double-entry or single-entry), you’ll have corresponding credit entries for any debits you make and vice versa.
All these terms and notions are crucial when it comes to bookkeeping, and knowing the ins and outs is necessary to run a business properly.
While bookkeeping is mostly about daily transactions, many aspects are also related to accounting. You can find more about the difference between bookkeeping and accounting by reading this article.
To help you solve your small business bookkeeping needs, we’ve prepared these top 10 bookkeeping tips to follow for a successful bookkeeping experience.
Organized record keeping is crucial for building profits in business. This means knowing (and having easy access to) all important information related to your business. This can include products, business transactions, business offers, services, and more. You also need to keep track of your revenue and expenses.
Luckily, the internet is packed with premade templates to help you handle your business accounts and expenses. There are dedicated financial templates you can fill out to make bookkeeping and other segments more straightforward.
Plus, with these templates, you’ll get an easily accessible business record you can offer to the IRS.
Feel free to explore premade templates online that work best for your specific bookkeeping needs for greater peace of mind. In the end, you won’t scratch your head looking for important documents trying to enter tax returns and whatnot. All your files will be nicely organized and ready to be used at any time.
Outsourcing your needs to professional bookkeeping service providers such as Swyft Books can help you in the long run. Educated professionals in the bookkeeping and accounting sectors have the tools, knowledge, and skills to take care of and improve your finances.
This kind of accounting software can teach you much more about your company with cloud-based technology. This will make your important data virtually impossible to lose or destroy.
Consequently, you can easily share this data with your bookkeeper, CPA, or other stakeholders. Financial information such as bank statements, financial reports, and similar cash flow information will be close by whenever you need it. Having this amount of control over important financial data is a great service you can’t afford to miss.
Here’s an overview of other benefits of professional bookkeeping services.
We all know how time-consuming running a business can be. This means you often forget about the little matter of paying the bills. Such a mundane task can result in big consequences, so it’s crucial to delegate the responsibility to someone with the time and skills to oversee all company bills.
As you grow your business, you’re likely to have more employees. A bookkeeping service is perfect for dealing with all the payroll needs. Your personal bookkeeper can write checks for you, so they’re ready to be delivered to your office or employees.
Bank statements aren’t the most reliable source for painting a financial picture of a business. Bookkeepers do a more reliable job of handling accounts, payables and receivables, and entering information into the software.
Modern-day small business owners only have to do a fraction of the things their 80s or 90s counterparts did manually. The emergence of bookkeeping software lets you automate tasks such as data entry, number reconciliation, bank account management, etc. Plus, you can get accurate real-time records when you sync your bookkeeping app with your business bank account. Also, your important financial documents will be stored securely on a cloud.
Bookkeeping isn’t a task that should be done once or twice per year. It’s an activity that should be a regular part of your weekly business tasks. Spending a few hours per week on bookkeeping can help you avoid overdue invoices, bounced checks, and unexplainable figures.
You can schedule time for book balancing consistently. Set aside blocks of time when your credit card statements are due. You can go over that month’s transactions to see if they are accurate. This shouldn’t take more than an hour but will simplify your life once the tax season arrives.
If you notice that it takes you much longer to sort out your statements, it may be time to hire a professional bookkeeping service.
Both bookkeeping and accounting activities should be reviewed thoroughly every quarter. During this time, you want to find trends, like sales growing or declining, changes in revenue compared to previous years, the number of late-paying customers, and more.
Tracking your business expenses is a key part of bookkeeping best practices.
The tax code has seen many changes over the past few years, so it’s best to discuss with your accountant which expenses you can deduct the following year. If you plan on claiming some items, it’s important to keep a detailed record of when you purchased them and how much you paid for them.
It’s important to know that all expenses related to your business can count toward tax deductibles. However, the personal expenses you make for your own pleasure won’t. This means that if you mix your personal expenses with business expenses, you may not be able to make a full claim. The best way to mitigate this is by using a separate business card for work-related purchases to ease the expense tracking process.
On occasion, you’ll have customers who don’t pay on time, which can impact your cash flow. It’s crucial to pay special attention to your receivables and endeavor to get payments from customers when they’re due. For example, you can set up a system that will send a reminder to the late-paying customer that their invoice is due shortly.
It’s important not to forget tax deadlines. You should have enough money in your account when that date approaches. You can get help from the IRS’s tax calendar for businesses. You can sync it to your own calendar so you never miss important dates.
Many small business owners make the mistake of adding their income and expenses for small business bookkeeping. This causes a lot of trouble in the future, especially when the time comes to sort your tax deductibles or write-offs.
The moment you start your small business, open a separate bank account. Get a business credit card and only use it for business expenses. In the end, it won’t only keep your expenses separate but will also help you create your own credit rating for your small business.
Additionally, you may also want to separate your personal email address from the business email address. This way, you won’t clutter your personal inbox with financial and other information that relates to your business.
Some of the tips mentioned above may work perfectly for you, while others won’t be useful. Either way, the best strategy to solve your bookkeeping needs is to create a personalized bookkeeping system that will work for your specific business needs.
If you don’t have much bookkeeping work and it takes you less than one hour per week to settle your bookkeeping, then it’s okay not to hire professional bookkeepers. But if you’re starting to hate your life because you’re stuck with late invoices, tax deductibles, and similar, you know it’s best to outsource the task to a professional.
The same goes for any other financial aspect of the business. The main point is to be able to focus on further growing your business and brainstorming ideas, not on counting checks and sending payment reminders to clients.
Once you find a system you can stick with in the long term, be sure to make the best use of it.
Who says bookkeeping has to be a complicated task? With the help of Swyft Books, you can have peace of mind knowing the financial aspects of your business are treated with care and professionalism. You can always give our software a free trial and see whether it works for your specific needs.