Keeping good financial records is essential for the success of your business. The numbers in your bank account measure your business and here are some key bookkeeping tips that successful businesses practice regularly.
By adopting good bookkeeping habits from the beginning will help ensure that mistakes are minimised and costly errors avoided. These bookkeeping tips will are designed to assist you to balance your books every month and to keep control of the finances of your company.
As a business owner, it is important to learn and understand how bookkeeping works. Bookkeeping refers mainly to the record-keeping aspects of accounting. While you may hire a professional bookkeeper to carry out these basic duties, it is essential for the success of your business to keep your finger on its financial pulse and to understand the principles of bookkeeping. Follow these bookkeeping tips to make your business successful and sustainable.
9 – Easy To Implement Bookkeeping Tips
1. Keep your business and personal finances separate! If you mix the two, it will quickly become a complicated mess. Separate the bank accounts from the beginning, and make sure all your transactions are processed through these accounts. It will enable you to quickly determine your cash flow as you can easily see your income on the one hand and your expenses on the other to gauge how well your business is doing.
2. Keep all of your financial records, your receipts and invoices for all expenditure, and all documents used in the day to day business transactions of the company. A good rule to follow is to throw away nothing in the bin. Always ensure you have all bank and credit card statements, profit and loss statements, balance sheets, receipts and invoices for sales and services rendered by the business. Ensure that employees attach copies of receipts to their expense claims. As a rule, you have to keep all records for six years in case you have to refer back to them to answer a query, and also if the authorities need them for tax purposes or other reasons.
3. Filing and invoicing has to be done regularly, even daily, to keep on top of your paperwork. Keep sales and purchase invoices separately. Sales invoices are sequential. You can file Purchase invoices in many different ways, but most importantly, your system has to be logical so you can put your hand on a document when you need to.
4. It is essential to keep detailed records of your petty cash transactions. Not only should you always insist on receipts, but also record every time you dip into your petty cash. If you reconcile your petty cash regularly, you minimise the risk of theft to the company. It is a particularly handy bookkeeping tip as you always stay on top of your petty cash transactions.
5. Bank your cash and cheque payments daily. It not only minimises the risk of theft but the sooner the money is in the bank, the better it is for your business and your cash flow.
6. Credit control is a vital function of bookkeeping so keep an eye on your debtors. Slow and late payments can harm your business and mess with your cash flow, so keep on top of your debtors. It is essential not to allow your clients to owe you money for long. To manage this; it is advisable to make sure no client orders any new goods or services until they have paid for the previous order. Follow up on late payments relentlessly. Cash flow is the key to business success so any action that minimises disruptions is essential.
7. If you keep up to date with your bookkeeping duties on a daily or weekly basis, you will remain in control of your business finances and foresee any problems which may be on the horizon. It is important to reconcile your bank accounts regularly. For the business owner, it is essential to review your accounts weekly to pay any overdue supplier invoices and chase unpaid invoices. You will be able to better manage your cash flow by getting to know your weekly expenses and be informed on current invoices. You will also be able to monitor and evaluate the weekly income and expenses incurred by the business. You will also see any areas where there is over-expenditure and be able to watch any problems with late payments. Producing a cash flow forecast will assist in this.
8. Forward planning is an essential part of bookkeeping, as it is mandatory to make provisions for all taxes due to authorities. Setting aside money, preferably in a separate bank account, ensures you always have funds available for these critical bills. This forward planning will cut down on your stress levels of trying to find the money when these payments fall due. Your accounting software will assist in keeping track of when payments are due and alert you a week or two in advance of due date for you to prepare.
9. A vital bookkeeping tip is to obtain simple accounting software that meets your business needs. It ensures your information is safely stored in the cloud, and you have access to your financial status at any time. Banking online and syncing your bookkeeping software with your bank account ensures your books are always up to date. Time tracking software will enable you to monitor your employees’ hours of work and will automatically calculate overtime, holiday pay, etc. This time tracking works with your bookkeeping software greatly simplifying your payroll.
Bookkeeping is the heart of your business. Businesses that follow good bookkeeping practices are well-governed and financial information is readily available for accurate decision making. By following these bookkeeping tips, you will boost your business’ chance of enjoying financial success. Automate wherever possible and ask your accountant for advice on which system would suit your business best, thereby ensuring that your Annual Financial Statements are timeous and accurate, giving confidence to investors and shareholders alike.