Bookkeeping is an essential component of every small and medium-sized business, serving as an indicator of the financial progress of an enterprise. With effective bookkeeping, businesses can keep track of their expenses, revenue, cash flow, profits, and financial performance.
Most business owners are caught up in the daily operations and the management of their enterprise that they forget to keep the business numbers on track. This can result in confusion or even losses when filing taxes and sorting out payroll. To avoid such costly impediments, smart bookkeeping strategies are inevitable. Here is a 6-tip guide on effective bookkeeping strategies for your business.
1. Separate Your Personal and Business Finances
Although a business bank account is not mandatory for small enterprises, it is important to open a bank account for your business. Business owners are often tempted to run some of the business operations with their personal finances.
While that may seem to be an attractive idea, it is likely to land in financial problems when filing returns or making financial allocations for the business. It is also almost impossible to know how your business is doing financially when you have your personal and business finance banked together.
2. Automate Your Bookkeeping
Bookkeeping used to be overwhelming and tedious when everything was run manually. With the advancement of technology today, business owners can have their book records automated using cloud-based systems. The use of cloud-computing technology to automate your business comes with numerous benefits, including:
- It saves time and money: Every transaction, process, bookkeeping, and accounting function are computerised. The much time and money spent in the creation of manual spreadsheets are brought to the minimal.
- Safety: Your bookkeeping data is stored in the cloud for retrieval at any time when needed. Clouds are safe, and they are not subject to sabotage or compromise compared to manual records.
- Financial connectivity: In addition to security and ease of running operations, the use of clouds allows businesses to have their bookkeeping applications connected to their bank accounts. This means that bookkeeping records are kept up to date always.
3. Review Your Books Regularly
A regular review of your books helps you to have an update on the status of your business. You should consider reviewing your books weekly, monthly, or quarter-yearly. This helps you to monitor whether your business is running in debts or how much profit has been accumulated over time. You are also able to keep track of the invoices.
This will also help you follow up on your debtors as well as settle your financial obligations to your creditors. Also, a regular check-up of your books gives you a clear picture of how your business is doing in terms of sales. If you have increased sales, then you might want to get more employees or even expand your business. If there is a decline in sales, then that might imply a need to evaluate your marketing techniques.
4. Hire a Bookkeeping Expert
Bookkeeping is critical in the day-to-day running of your business. Apart from keeping records on business expenses, transactions, and invoices, bookkeeping provides the framework within which financial statements will be prepared.
If you cannot handle bookkeeping responsibilities, it would be in the best interest of your business to hire a professional bookkeeper. Bookkeeping in Chelmsford for small businesses can sometimes be overwhelming for you if you are also involved in running the business too. In this case, it is recommended to have an accountant on retainer. This means that you will have a professional accountant who is conversant with the financial operations of your business.
5. Stay on Top of Your Deadlines and Tax Obligations
Running a business involves beating one deadline after the other, and the same is replicated in bookkeeping. These deadlines include filing taxes and keeping track of your credit status by making payments on time.
Missing out on these deadlines might land you in legal battles that you might want to avoid at all costs. You can use different resources such as a tax calendar to ensure that your tax reports are filed in good time. You may also instruct your hired accountant to do the job for you.
6. Fix Mistakes as Soon as You Notice Them
Mistakes are part and parcel of bookkeeping. However, failure to address these mistakes may land your business into a downfall. Since you are already aware that a regular review of your books is essential, consider correcting the errors you come across during this review. Some of these errors might be costly to fix when ignored for long. If an error is beyond your ability to fix, hire a professional to have your accounts fixed.