Properly maintaining a record of your business’s expenses is vital to both day to day operations and its long-term longevity. Every single one of those numbers is crucial and even one small mistake could spiral into a much bigger problem. With effective small business 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.
1. Separation is Important
A mistake that too many new small businesses make is lumping all of their funds into one account. There are so many moving parts to small business finances that it’s important to separate these components as soon as possible.
For instance, separate out personal finances and business finances, even if you’re a sole proprietor with a relatively small operation. Open a business bank account as soon as you decide to go through with your startup, and get a separate business credit card. This not only separates your accounts but also helps your business build its own credit rating. You’ll also want to separate income that comes from different sources – for example, incoming funds from paying clients versus funds that come from loans.
2. Automate Whenever Possible
Small business 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 is computerized. The much time and money spent on 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. Keep Expense Receipts
You can’t know how much you’re spending on your business if you don’t keep receipts. This is somewhat straightforward for credit card purchases since you’ll have both receipts and monthly statements against which to check them.
Where things can get tricky is if you aren’t careful with cash expenses. These receipts matter even more since there are no backup statements. Some people keep a small notebook with them to log cash expenses as they’re incurred. Better yet, entrepreneurs could follow Smith’s lead—she uses an accounting app on her phone to snap pictures of her receipts as she goes, and doesn’t keep the paper copies.
4. 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.
5. Plan Ahead
Schedule events as far as you can in advance, and plan your budget for them. Things like computer upgrades take a large chunk out of your finances and need to be in your financial plans. Take into account business seasons ups and downs in order to be realistic, which will make you less likely to need to scramble for a loan when these types of events inevitably come up.
6. Work with a Local Accountant in Denver
Business owners often look at their accountants as just another expense and only visit during tax crunch time. A trusted accountant, however, can be a key ally in your business, helping to guide its path to success, shaping it to provide better returns, and helping spot potential issues in the business before they arise.
Entrepreneurs should approach their accountants as business partners, not just tax prep, and find someone who can offer insight into the business. A great accountant can help take a business to the next level.
Final Thoughts
Small business bookkeeping can be overwhelming, but if you keep clean, organized records, you’re well on your way to a financially successful business! Having an employee or small business bookkeeping services handle this for you will protect you from costly mistakes down the road.
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We’ll connect you with one of our expert bookkeepers and they’ll get to know your business, and deliver monthly books and year-end financials. You will have the ability to see what your money is up to. Your income statement, balance sheet, and visual reports provide the data you need to grow your business. Sign up today and we’ll provide a free financial analysis of your business!
