Disclaimer: Please note this article is not financial advice. The purpose of our blog is purely educational, so please consult a professional accountant or financial advisor before making any financial decision.
Bookkeeping and accounting are essential for any successful business. When managed efficiently, they provide a detailed account of financial transactions. Complete data enables businesses to make informed decisions based on accurate information. By understanding how to use bookkeeping and accounting to their advantage, business owners can monitor and analyze their finances, identify revenue streams, and manage expenses—all of which can ultimately boost profits.
This article provides seven ways to utilize bookkeeping and accounting to monitor your business's financial transactions. From recording transactions to making sense of the numbers through regular reports, we’ll provide practical tips and strategies to help any business maximize its financial potential.
1. Track Your Financial Assets and Liabilities
Among the many complex accounting journal entries within your books, your financial transactions can be summarized into two details: assets and liabilities.
Assets
Assets are the funds coming from a sales transaction and the monetary value of the equipment, machines, and properties your company has. It also includes accounts receivables or the payments you have yet to receive from clients or customers. All the items in your inventory have a value and are included in your assets too. And if there are supplies or services you’ve paid for in advance but have yet to be delivered to you, categorize them as assets. Investments, trademarks, patents, and goodwill all fall under this same category.
Liabilities
Meanwhile, liabilities are everything under your accounts payable and those already deducted from your income to pay rent, utility fees, debts, and the cost of goods sold. These are the wages you give to your employees, the dividends your shareholders get, and even your owner’s equity.
When your company bookkeeping is in place, you can analyze where your funds are coming from and plan how to continue or increase the inflow of cash. You’ll also see cost culprits and map out how to lower them.
2. Monitor Bank Financial Transactions
One thing you can do to track your income and expenses efficiently is to connect your bank to bookkeeping and accounting software. This way, all the cash coming in and withdrawals happening in the bank will automatically be recorded in the books. Transactions will also be categorized immediately so you can include bank details in your central financial system.
Through bank connections, bank reconciliation will be easier too. You can compare what’s recorded in the books and your bank statement. You can check if all transactions are accounted for, and if not, you can investigate what happened or correct the data right away.
3. Pay the Correct Financial Transaction Tax
Another responsibility you need to accomplish as a business owner is paying taxes. You are responsible for paying your yearly income tax and must calculate, charge, and remit sales taxes to the tax bureau.
But tax computation isn’t easy, especially with localized rules. Yet, you can forget your worries when your bookkeeping and accounting are in place. When all your income and expenses are tracked, you can efficiently compute your annual income, which is the basis of your tax rate. You can track and calculate the sales taxes you’ve collected from sales and remit the exact amount on time and even automatically.
4. Compensate Your Employees
As you grow your business, you need more hands to help you. Part of your business financial transactions is your employees’ compensation. You’ll be responsible for your employees’ monthly salary, incentives and benefits, taxes, and other mandated deductions.
Streamline the computation on how much they’ll get and how much you’ll deduct through bookkeeping and accounting. You can also send their salaries straight into their accounts by integrating payroll software into your accounting system. Don’t worry about late payments and keep the workforce's morale high as you can schedule payment sending through the help of payroll software.
5. Handle Invoices Properly
Staying on top of your invoices can benefit your cash flow. Through invoicing, you can remind clients and customers who owe you money. With the right tool, you can schedule these reminders to ensure you don’t forget to send them and your customers do not forget to pay.
These invoices are sent online, so you won’t have the hassle of printing them on paper and delivering them face-to-face. Clients and customers can pay conveniently and skip the cash method of payment, too, as the electronic invoices also come with a “Pay Now” button. The payment goes straight into your account and gets recorded on the books automatically.
6. Get Financial Reports Regularly
Your books that are filled with numbers and organized in different financial categories will make more sense through financial reports. Make sure that you know what the intentions of the reports are, so you can understand them better.
Balance Sheet
Assets, liabilities, and equity are the three main contents of a balance sheet. The rule is that your assets should equal or even exceed your liabilities and equity. Through bookkeeping and accounting, you can check whether your assets are higher than your liabilities and whether you can get satisfying equity from your business.
Income Statement
An income statement shows income, expenses, and profit. To determine if the company is profitable, you and investors can check this report. An income statement report includes the following:
- Income From Sales
- Cost of Goods Sold or Cost of Sales
- Gross Profit and Operating Expenses
- Operating Income
- Earnings Before Taxes
- Net Income
Cash Flow Statement
Meanwhile, if you or investors want to see the cash flow in your business, check the cash flow statement. This report shows how money enters and leaves your accounts through operating and financing activities.
Statement of Owner’s Equity
The statement of owner’s equity shows the money left for you after you deduct all liabilities from the assets. Ensure that your business assets are higher than the liabilities to get your owner’s share from the profits instead of the capital.
7. Do Business Planning and Forecasting
Forecast the financial transactions you will have on a future date based on the historical data stored in your bookkeeping and accounting system. Look back on your best practices in achieving the numbers and duplicate the same actions to achieve the forecast.
Make a solid plan to achieve your goals. Have the flexibility to adjust game plans as needed. You can also double up your efforts if you want to exceed your previous financial achievements. And, of course, regularly set meetings with your financial team to check your progress.
Go the Extra Mile: Tips to Get Bookkeeping and Accounting Right
Get the Right Software
Keep your bookkeeping and accounting system up-to-date and secure financial transactions by investing in the right software. There will be some costs, but the investment will be worth it as these tools minimize human errors. They can also integrate with other financial tools. And many of them are cloud-based, so your data will be protected.
Bookkeeping and Accounting Software
Start by investing in bookkeeping and accounting software that record financial transactions in all your ventures. QuickBooks, Xero, Sage50 cloud, FreshBooks, and Wave Accounting are some tools you can check. Their features and plans vary. Pick the one that suits your business’s needs.
Tax Software
You can invest in tax software like Avalara, Taxomate, TaxJar, and Taxify to compute, track, and even submit the sales taxes you collect from your stores. You can also integrate these tools into your accounting system so all your business financial transactions are kept in one place.
Documentation and Data Capture Software
Manual inputs increase the risk of committing mistakes, and these aren’t acceptable when talking about finances. Skip the hassle of typing in data from printed sources like receipts and invoices, and let a software do it for you. These can turn hard copy documents into computer text for recording.
Hire Competent Bookkeepers and Accountants
Last and not least, your business bookkeeping and accounting are handled better when you have the right people to do the job. Delegate the painstaking task of financial tracking to experts—by doing this, you’ll have more time to work on your business instead of stressing out about something you’re not confident at.
A professional bookkeeper can keep your books organized, while an accountant will help you make sense of the numbers through regular reports. They will work together to ensure that you have the financial data you need. Accountants can show you an in-depth analysis of your finances, and they are also capable of giving financial advice that you can consider in your decision-making process.
Get Assistance From Unloop!
Bookkeeping and accounting play a crucial role in the success of any business. By monitoring and analyzing transactions, identifying revenue streams, and managing expenses, you can maximize your business’s financial potential.If you need assistance in bookkeeping and accounting, Unloop can help. Our team of experts can provide the professional guidance you need to help your business grow and succeed. So, what are you waiting for? Book a call with us now so we can discuss our offers with you!