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10 Bookkeeping Tips to Use All Year Round

Any business might find accounting tedious, but filing taxes could become a nightmare if your small business doesn't keep accurate records. Without a structure for your company's finances, many things may go through the gaps and ultimately cost you money. You may improve your financial status and perhaps raise your income with a simple approach and some bookkeeping advice. The objective is to have a streamlined method that outlines the financials of your company produced. Your life as a small business owner may be made ten times simpler by having a system that integrates your costs, invoices, deposit records, and tax information, especially as tax season approaches.

A significant component of every commercial endeavor is bookkeeping. Always keep your receipts, especially for purchases above $80, to make the procedure easier. When it comes to deducting company expenses on your tax returns, having backup paperwork will be helpful.

Make sure your personnel are accurately identified and classified for tax purposes. Make sure the numbers add up by reconciling your monthly bank accounts and books. In case of a technological malfunction, backup all your financial papers, ideally intangible ones, in paper and electronic form. You will be less likely to pay taxes on money that is not income if you keep track of your deposits to know exactly what is coming into your company account. Keep track of and stay on top of your company bills.

10 Tips in Bookkeeping That You Can Apply All-Year Round

Recognize the Fundamentals of Bookkeeping

You must comprehend the components of bookkeeping before you begin your own. The four primary parts are payroll, accounts receivable, accounts payable, and bank reconciliation.

Your company's bookkeeping may also contain cash, inventories, debts that need to be paid back, sales, purchases, owners' equity, and retained profits.

Maintaining an accounting system is especially crucial for controlling your financial flow, and it guarantees accurate cost recording and constant income values. However, bookkeeping does more than enable you to gauge the state of your company. By adopting bookkeeping, a business owner can also better comprehend their progress. You may spot trends and draw parallels with prior fiscal years.

Finally, effective accounting makes many dealings with third parties much simpler. When you ultimately want to speak with lenders, it will be simpler for them to make sound judgments if you keep solid books.

Separate Business from Personal Accounts

It's not as simple as it may appear to avoid opening a new bank account when beginning a small business. Even if skipping a trip to the bank is enticing, your personal and professional finances will suffer in the long run.

It's considerably more difficult to separate your personal and small company banking needs when you have one bank account. Why? Because you would need to be aware of the reason behind every transaction you make. At first, this doesn't seem all that problematic. If you keep track of your receipts daily, you will still remember every transaction.

Maintain economic segregation. Combining your personal and corporate finances is chaos rather than more money. By keeping separate bank accounts for your personal and company expenses, you may avoid confusion and keep things simple instead of wasting time and energy trying to sort through cluttered accounts.

Opening a business bank account is simple, even if you've never done it before. Find a bank that best matches your company's needs first; even if you currently work with one, it doesn't harm to look into other possibilities. Although your goals may differ, think about shopping for an account with little or no bank fees.

Record Everything

The IRS has a six-year auditing window to clear up any confusion, and clean records are essential. Although keeping such records for at least six years is crucial, you can only sleep soundly at night if you consistently keep a trustworthy record of your debits and credits.

Make a habit of recording everything to guarantee that sound sleep. Maintain receipts. Notes on purchases and costs should be made and placed in the file. Keep track of all of your cash purchases. For every purchase, keep your receipts. Create a system for storing invoices, receipts, records, and a naming convention. Perhaps it's even time to spend money on a receipt scanning app.

Remember to record and keep accurate records of any transaction involving money, time, or commodities if you're unsure which costs to keep track of.

Keep track of and organize your weekly records during your weekly bookkeeping session. Thanks to quick, routine audits of your paperwork and transactions, you won't ever experience a stressful night's sleep, at least not as far as your books are concerned.

Understanding the Distinction Between Invoices and Receipts

One all-too-common way small business owners muck up their finances is by combining invoices and receipts. Knowing the distinction between the two is a straightforward accounting tip.

A bill that is issued to clients after they have received your services is called an invoice. Consider invoices as comprehensive statements of everything the client has purchased from you. A bill informs clients they have money due to you. They're useful for accelerating cash flow, maintaining financial records, and making sure you get paid.

A receipt serves as documentation of a transaction, and it's what you provide your clients once a sale has been made.

Accounting may become a nightmare if invoices and receipts get mixed up. Balancing your books will be difficult if you can't distinguish between completed and ongoing tasks.

Observe the Cash Flow

Cash flow is one of your company's health's crucial financial indicators. It's one of the most elusive numbers, though, as well. Why?

Looking at your books, a stuffed accounts receivable folder could trick you. You have a lot of individuals owing you money, and that's fantastic. But will they follow through?

You're in danger if your receiving payments are due later (or arrive later) than your outbound transactions. And since poor cash flow contributes significantly to small business difficulties, it's crucial to manage your cash flow regularly.

Regularly compare your receiving payment dates to your outgoing payment deadlines. Find out why your business partners are paying you late and when you may anticipate your money by contacting them. Utilize a quick and secure payment mechanism to save time on delayed bank wires.

Always Maintain Order in Your Records

Cluttered records may cause further bookkeeping headaches if it's already difficult to look through one account where personal and commercial finances are pouring in.

You may save a ton of time by knowing exactly what is kept when records are in good condition and organized well. You'll be grateful that you took the effort to keep your documents organized so that you may save time by knowing exactly where to search if you're too busy and nearing tax deadlines.

But be careful to organize your records, not just once or twice consistently.

Learn More About Tax Laws and Regulations

Tax regulations for businesses differ greatly from those for individuals. When tax season comes around, keep a thorough record of all transactions, tax deductions, and cash flow. Understanding how tax regulations impact these factors can realize long-term time and financial savings.

Review Financial Reports Consistently

You may access trustworthy financial records whenever you need them when you update your financial information weekly. You may examine your income statement and balance sheet at the push of a button using simple accounting software. Are you interested in your performance this quarter? This season? Today? Find out right away.

Since reliable financial reports are so easy to obtain, it only makes sense to review them frequently to gauge how your company is doing. This might be the last item on your weekly bookkeeping check-in. Run a brief report after entering your transactions and verifying your supporting documents. A weekly income statement is one of the few motivators that truly works.

Use Accounting Software

The majority of your accounting and bookkeeping is automated.

Make use of a cloud-based bookkeeping system. As a result, you will have access to your financial information from anywhere around the globe, and if you engage a bookkeeper or accountant, they will have real-time access to your data.

SMB owners may typically get by with software that performs the following tasks: cashbook, ledger, bank reconciliation, accounts receivable and accounts payable operations.

Using cloud-based accounting software entails more than having access to your information from any location. Additionally, it keeps your financial information very private.

Since most, if not all, accounting solutions are online, your data will always be backed up and current, and many, if not all, of them, employ data encryption to help protect your information. Additionally, any modifications to federal and global variables will be adjusted immediately.

Hire a Professional

What is even better than employing software to automate your bookkeeping? Entrusting it to a qualified bookkeeper.

Your business needs all your focus, so sometimes, the best course of action is to outsource the activities you don't have time for so you can concentrate on the job that matters most to you. The details of do-it-yourself bookkeeping won't daunt a professional bookkeeper, and their assistance enables you to concentrate on producing money rather than recording it.

Various tasks may be assigned to modern bookkeepers, including:

  • Taking care of receivables. To ensure that you are paid on time, bookkeepers are in charge of creating invoices and mailing them to customers. A bookkeeper is also likely to be in charge of the accounts receivable sheet and track down overdue payments to maintain your records up to date.

  • Handling payroll. Some can manage payroll and other HR functions for small businesses. One example of this is assisting businesses with the processing of employee tax payments and salary payments.

  • They can monitor cash flow by monitoring the revenue-to-expense ratio and providing further guidance if the business needs more money to run.

Before starting your records, speak with an accountant if you don't (yet) have the funds to hire one full-time. You should be able to engage a local (or even online) bookkeeper on a retainer basis or for an hourly charge. They can provide helpful advice on how to set up your books, choose the appropriate kind of business accounts, and explain the fundamental bookkeeping concepts that will keep your company afloat.

Knowledge and consistency are both necessary for successful bookkeeping. It would help if you educated yourself on the foundations of sound bookkeeping and consistently put those ideas into practice. Having a reliable system in place to manage your finances is also beneficial. You may avoid further administrative and human mistakes by integrating your payment processing system with your accounting software, which guarantees that payment data flows easily from one platform to the next.

Are you a small business owner who finds it difficult to manage your business finances and accounting? Worry no more because PROFIT Bank is here to help you. You can open a bank account free at PROFIT Bank, and we also offer free bookkeeping services for small businesses. We have a reliable system and bookkeeping software to keep all your records organized and updated. What are you waiting for? Visit our website now and learn how to open an account with us!

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