If you have a small business, most of your accounting tasks will fall under bookkeeping. However, bookkeeping is more than just keeping organized records of your business expenses. Every record you store is essential in tracking and improving your business's overall financial health.
Fortunately, you don't have to be a bookkeeping expert to handle your business's bookkeeping needs. But still, many small business owners can't do their bookkeeping properly. So here are some fool-proof accounting tips for small businesses to handle your books properly.
Keep on Top of Your Accounts Receivables
Getting paid is the most exciting part of running a business. But managing your accounts receivables is not as fun as getting paid. It is important that you list as soon as your customer pays you so you can monitor if they still have any outstanding balances.
However, as your orders increase and you receive more payments, keeping up with your receivables will be more difficult to accomplish. So when it's time to balance your books, you'll often encounter a lot of discrepancies, especially if you forget to log those receivables.
Make it a weekly habit to record all your receivables. So by the end of each month, your transactions won't pile up and get lost.
Create a Bookkeeping Routine To Follow
Bookkeeping is manageable if you do it routinely and in parts. Even though it is tempting to cram everything right before tax season, you'll thank yourself for handling bookkeeping better and more promptly. In addition, spending more time on bookkeeping means your data is much more likely to be accurate.
For small business owners, here are basic bookkeeping tasks you should accomplish every week:
- Check invoices and record payments
- Review and pay business expenses
- Balance business checking accounts
- Record and store all receipts relating to the business
- Compile and validate your financial statements
Understand Your Cash Flow
Even if you're no professional bookkeeper, it is still important that you put effort into understanding how accounting works. The more you understand what the numbers you see means, the easier it is for you to do several accounting and bookkeeping tasks.
After ticking your monthly bookkeeping checklist, you should consider making cash flow statements. This financial statement gives you a better understanding of your company's cash position. It lets you see the cycle of your income and expenses. With this, you can properly plan and allocate your business's finances.
Document All Business Transactions
It's a common mistake for business owners to forget to make copies of their business transactions, leading to several accounting issues. Being diligent with compiling receipts of your business transactions is important for accurate bookkeeping.
Additionally, several bookkeeping software will help you track and store your business receipts. They have features that let you take a snap of the receipts and instantly log any expenses or sales in the software so that you can record every last one of your transactions.
Aside from having more organized books, keeping track of your transactions can also save you money. One example is by logging business expenses which you can write off on your taxes.
If you're still confused about the expenses you can claim as business expenses, here are some examples in different categories.
- Travel expenses: All travel expenses related to business fall under this category. For example, if you are meeting a client out of town, you can list the cost of gas or plane tickets under business expenses.
- Home office expenses: Any money you spend on office supplies or equipment like computers, printers, paper, staples, pens, or any other office supplies falls under this category.
- Entertainment: The money you use to entertain your clients is a business expense. For example, paying for a meal while you and your client discuss aspects of your business is a valid business expense.
The list of business expenses goes on and is not limited to these three categories. As long as they are not expenses for personal use and you have the receipts to prove it, you can log them as a company expense.
Automate Necessary Accounting Tasks
Bookkeeping software is there for a purpose, so maximize them. Accounting software can automate several tasks so you can focus on other parts of your business. Invest in software that can simplify tasks for you. Here are some accounting tasks you can consider for automation:
- Recurring invoices
- Payroll deposits
- Generating business reports
- Accounts payable notifications
- Bank reconciliation
These are just some of the tasks that will benefit greatly from automation. Other advanced software can do more, so make sure to invest in a software your business needs and one that fits within your budget.
Learn Double-Entry Bookkeeping
Almost all businesses today use accounting software for their bookkeeping instead of recording in physical books. However, if your small business cannot afford software yet, understanding and knowing how to do double-entry bookkeeping is best for your accounting processes.
In simple terms, double-entry bookkeeping records the transaction's expense and gain. For example, you buy 2 kgs of lip gloss base for $30 for your cosmetic business. You will record -30 on your expenses but record +2 on your inventory gain.
This bookkeeping style will help you assess your business performance and make better financial decisions.
Put Extra Effort Into Tracking Cash Payments
Receiving cash payments for your business is exciting, but tracking them is not as fun as it sounds. In bookkeeping, keeping track of cash payments is tedious.
Unlike other methods like online payments, bank transfers, debit, and credit cards, which leave a trail when the transaction is complete,cash payments don't leave proof unless you write them down. So when your business accepts cash, make it a habit to give receipts at the end of each transaction. In addition, you should have a receipt book so you can give your customers a copy of the receipt and have one for yourself.
Look Ahead of Your Finances
Preparing for your business's future is great for bookkeeping. There are two ways you can plan ahead for your business. First, have plans for major expenses. There's no telling when you need to stock your inventory big time or replace a piece of expensive equipment. In these cases, sudden expenses can disrupt your cash flow.
Next, use your financial statements to anticipate your business's financial position. Cash flow statements, expense records, income statements, and other reports help you project your budget for the next few months. If you are always on top of your financial management, you'll handle bookkeeping duties easier.
Don't Be Afraid To Use Technology
The best accounting tips for small business owners all boils down to choosing the best software. Unfortunately, most small business owners are still reluctant to invest in software, thinking it's too big of an expense.
But in reality, there are several free accounting software that can perform basic accounting tasks that small businesses may need. So before dismissing the thought of getting an accounting system, look for options that will fit your budget. You'll be surprised by the tons of options you can choose from.
Get Professional Help
One thing is sure, accounting is not for everybody. So if you think that bookkeeping tasks are too much for you and your time is better spent on other parts of your business, outsource it to a professional.
As your business grows, accounting tasks will be more demanding and time-consuming. However, with a professional bookkeeper, you're sure that your finances will be in order. Furthermore, you’re assured that everything they do is accurate and valid.
The foundation of good accounting is organized and proper bookkeeping, and as a business owner, it starts with you. We hope these accounting tips help you manage your bookkeeping tasks properly.
If you need professional help with your bookkeeping needs, Unloop offers professional accounting help for your ecommerce business. So check out our different services and book a call with us today!