Besides, personal finance management is not a very hard task to complete. You may already have at least one checking and savings account including an IRA, a few investment profiles, a couple of monthly subscriptions, and one folder for receipts as a tax record.
Our firm WorStaff360 delivers its bookkeeping services to early-stage startups as well as those already operating their small business.
In running a business, for example, there is a lot more to bookkeeping and accounting than it is for someone who simply takes care of their finances. At this point, the implications are much more serious than merely keeping track of your income and expenditure.
Then how to be a good bookkeeper for small business? This is a question which has several answers.
In this article, you’ll discover the top 16 bookkeeping techniques every small business owner should be aware of.
Why Is Bookkeeping Important for Every Small Business?
To keep your business afloat, you need a good system of accounting that provides a clear picture of your situation and allows for strategic management.
It involves transactions regarding and statements of your financial position, on which all is dependent whether it is to ascertain your business performance or to plan for the future.
Practices in bookkeeping should identify revenue streams, both income and expenditures and let down the financial risks to meet your business’s financial goal.
Best Bookkeeping Practices For Small Business Owners
Following are the key practices that anyone can follow to give their businesses a successful start:
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Planning for Taxes and Audits
The taxing time will become less complicated by having good bookkeeping practices. Careful record-keeping and knowledge of tax duties would enable businesses to maximize the deduction of their taxes, thus they would be ready to defend themselves and disapprove penalties and fines for audits at tax agencies.
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Separate your Personal and Business Accounts
The foremost principle of the bookkeeping best practices is to keep your personal and business finances interest-free. Administering both sectors at the same time can mean serious troubles such as incomplete documentation, and even legal problems. Set up a specialty business bank account and credit card that would be used only for business deals.
Thus, having your personal and company finances in separate accounts will be a clear indicator of your business’s financial health, will make doing tax returns much easier, and in case of any lawsuits, you will be safe.
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Use Accounting Software to Streamline Processes
Nowadays there is no reason for the manual method of bookkeeping since there is a digital age. Choose good quality accounting software that is reliable like Quickbooks or Freshbooks to improve your bookkeeping processes.
These tools not only simplify many operations like detecting expenditures, generating invoices, and creating financial statements but also help to speed up the business process.
Accountancy programs can save your time, decrease the possibility of making mistakes, offering additional helpful information to track the progress of your business. Pick a solution fitting your tasks and make sure you have all information on how to manage it properly.
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Record Transactions Accurately and Promptly
Create a system of keeping track of the movement of your business’ money every time there is a sale, expense, or income. This will ensure you have the updated details to prevent you from losing or entering the same input data.
Take care in putting down any details like dates, amounts, as well as descriptions about each transaction. These details will be essential while preparing tax returns, reconciling accounts, and analyzing the business performance to ensure reasonable accuracy. -
Keep Receipts and Invoices Organized
The bills and invoices should be your core documents when you’re about to do your bookkeeping. Design and implement a filing system that will guarantee safe-keeping places, whether it is physical or electronic.
One of the options you can consider is to digitalize all paper receipts and invoices, using a scanner or app, for effortless organization and backup.
Having an accurate record of invoices and receipts will allow you to allocate funds better, confirm transactions, and provide proof of expenditure during external audits or journalist investigations.
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Reconcile Your Bank Accounts Regularly
Correctly reconciling your bank accounts is one of the essential steps in preserving quality financial records. It entails a comparison of your internal books to the statements from your bank to highlight and close all the gaps.
Set a schedule for you to reconcile your account in scheduled way such as monthly or quarterly. It is precisely such a move that will allow you to discover any mistakes or fraud in good time which will, in turn, make your accounts a true record of your financial position. -
Understand and Follow Accounting Principles
For sure, you don’t have to be an accomplished accountant; however, it’s crucial to have at least a basic accounting concept and practice level of knowledge. Learn the ways of accrual accounting, matching principles, and double-entry bookkeeping.
The GAAP (Generally Accepted Accounting Principles) application will, among others, result in accurate, consistent, and compliant financial records concerning industry standards. An understanding of this kind of financial language will also help you work out stuff together with your accountant or bookkeeper.
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Hire a Professional Bookkeeper or Accountant
You may find bookkeeping becoming more complicated and time-consuming due to the scaling of your company. Look into either a professional bookkeeper or an accountant to do the financial records for you if you believe it is an area where you lack the skills or your time is not enough for that.
Using a trained accountant or bookkeeper, the books can be properly credited, updated, and in accordance with the tax laws. They help to inform and offer great advice concerning financial management, tax planning, and strategic planning for businesses.
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Stay Up-to-Date with Tax Requirements
Ensure that you have accurate bookkeeping records, for the reason of filling in your tax obligations. Being aware of the tax laws, deadlines, and compliance requirements applicable to your business and the area of its operation is one of the important aspects to be taken into consideration.
Refer a professional tax expert or government agency resource sites to ensure you are complying with rules and regulations of tax filing.Not meeting tax requirements may give you late charges, penalties, and even legal issues, which is why you need to emphasize the financial needs of your business.
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Review Financial Reports and Analyze Performance
Financial reporting is about recording transactions and using that data to take advantage of sound business decision-making. Keep checking the financial accounts, like the income statements, balance sheets, and cash flow statements, to be updated on the business’s financial reports.
Through the analysis of these reports, determine if there are any emerging procedures, problems, or chances for increasing efficiencies and lower costs. Use this information to align strategies, create feasible aims, and take data-driven steps that will together sustain your business in the end.
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Explore Advanced Techniques
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Job costing
- Measure the profitability of particular undertakings or tasks as well.
- Allocate costs accurately: allow for (labor, materials, overhead).
- Finding areas for profits and losses is critical.
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Inventory management
- Avoid stockouts or overstocking
- Strengthen the cash flow and minimize the holding cost.
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Managing Business Expenses
Correct management of the expenses of the business will ensure the inflow of money & profitability. Maintaining detailed records related to all business expenses, and sorting them into specific categories to better understand their effect on the financial condition of your venture is crucial. Periodic audit of expenses helps in recognizing cost-cutting plans and using funds wisely.
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Invoice Management for Healthy Cash Flow
Invoices are an integral part of the process of cash management and getting clients to pay their dues on time. Considering a systematic invoicing system (extremely developer, unambiguous terms, and timely follow-up) can effectively minimize the level of payment delays. Bookkeeping software equipped with invoicing functions will allow us to carry out that without any human error and save a lot of time.
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Adjust Balance Sheet
Calculate and analyze adjustment entries for depreciation, accruals, and prepayments on the balance sheet. These changes let you know that your financial statements truly represent the actual value of your assets, liabilities, and equity. Accurate recording of these items is the most effective method of maintaining a viable financial reporting system.
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Conduct Periodic Audits
Conduct periodic audits or reviews of your bookkeeping records to identify and correct errors. Periodical audits help preserve the honesty of your books of accounts and manifestly prevent minor mistakes from gradually breeding into monstrous inaccuracy.
Consider using the services of an outside accountant or bookkeeper to audit the financial situation.
Make it a habit to conduct audits or reviews of your bookkeeping records periodically to rectify mistakes. -
Outsourcing vs. DIY Bookkeeping: Deciding the Best Approach
In the case of deciding to do bookkeeping by yourself or to outsource it, a lot of factors are taken into consideration, such as the size of your business, the amount of complexity of transactions, and whether the resources available are enough for bookkeeping. Contracted workers can supply know-how and save time, but such an approach will also cost you. On the other hand, self-made accounting gives you control and deeper insight into your business’s finances while also requiring time and knowledge. Possessing the positive and exploring the stand of each option can help detect the best approach for your business.
Avoiding Common Bookkeeping Mistakes
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Mistakes
- Failing to keep receipts
- Not taking into account minor or petty transactions
- Incorrect data entry
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Solutions
- Launch a strong bookkeeping framework
- Use reliable accounting software
- Periodically review your books
- Maintain proper documentation
- Make it easy to prepare taxes and through audits.
Through the use of these solutions, making fewer mistakes and keeping useful financial records is possible, helping to grow and keep the business healthy for a long time.
Change Your Back Office from Record Keeping Department to Business Development Authority with WS360
With WorkStaff360, you are assured that our virtual bookkeeping experts are right there to match your bookkeeping services with your growing company.
We assist you in starting as simple and systematically as possible and help you wisely choose the best software that will meet all your monthly tasks.
These basic services can be extended up to a fully managed service that is provided with a staff of professional bookkeepers and accountants who handle daily jobs, monthly reconciliation, and quarterly tasks.
Good back office functions will predict and protect your business from risks and market threats, also will ensure smooth operation, optimize cost, and increase your profit to have a sustainable and strong business.
FAQs- bookkeeping best practices in 2024
FAQ 1: How are accounts payable and accounts receivable management often overlooked in accounting systems?
Keep detailed records of invoices and record them at the close of the day. Generate aging reports. Set automated reminders/recurring entries.
FAQ 2: Am I aware of spreadsheet tools and whether I can use them instead of accounting systems?
Spreadsheets cannot provide accounting functions such as entitled to honor balances, adjustments, and reports. Error-prone, non-securely, it can’t follow standard regulations.
FAQ 3: Why there is a need to have accurate and efficient accounts payable and receivable in the accounting system?
- Reconcile accounts per a person’s statement/invoice in time.
- Maintains documentation for transactions.
- Conduct the review process on a periodic basis to cure any inaccuracies.
- Validate data/results that are entered in spreadsheets by executing a dictionary looking in order to find a match.
