Top 10 bookkeeping tips for better financial management
Bookkeeping, admittedly, can be a tedious activity for any business. But whether you have a small business or a bigger one, bookkeeping is an integral part and is something you cannot do without.
For better financial management, you need to keep your bookkeeping a top-notch shape. You need a clear-cut process for better financial management. Listed below are 10 bookkeeping tips that can help you get a better grip on your business as well as personal finances.
1. Digitise your bookkeeping as early as possible
There are some excellent software applications available you can migrate your conventional accounting to. They are also a cloud-based so all you need is a conventional browser to enter your accounting information. Some of the widely used accounting applications are Sage, QuickBooks, FreshBooks, Zoho Books, and Xero.
They have highly scalable subscription packages. Whether a single employee is going to use the bookkeeping software or multiple employees, you can go for a subscription accordingly. All the standard accounting and bookkeeping features are available in all the mainstream digital accounting applications.
What’s the benefit?
Your data is always backed up. You can carry out complex analysis on your data. It is portable so you can easily export it into any other application. You can generate as many reports as possible with varying formats. You can maintain your books even on your mobile phone.
2. Get technical help to set up your bookkeeping software
This will save you a ton of time and multiple bookkeeping errors later. At BBKs Accounting our expert team has been using digital bookkeeping software for many years. We can get you started without chances of mistakes and oversights.
The technical team will help you set up your account as per your business. We can help you brand your reports with your logo and business message. We can also remove unnecessary headers and make the entire process less complicated.
3. Keep separate accounts for sales and purchase
This will help you maintain a financially stable balance sheet. Always keep your sales and purchase invoices separately. Whereas sales invoices should be raised and filed sequentially, purchase invoices can be filed in whichever convenient manner suitable to your business process.
4. Draw a clear distinction between business and personal expenses
These lines can be easily blurred if you are running a small business. You need to purchase a chair for your sitting room or you need to pay for the repair of the window. Is this a personal expense or a business expense?
Spend some time with your accountant and prepare separate columns for personal and business expenses and then start maintaining your books accordingly. This will have a direct impact not just on your taxes but also your business cash flow.
There can be many instances when you draw money from your business for personal expenses or you put money into your business from personal funds. You need to figure out whether such transactions amount to income or expenses. Money going out of your personal account can be money going in, in your business account, and vice versa.
5. Keep a close watch on your payables and receivables
Payables is the amount of money that you need to pay and your other financial obligations. Receivables is the amount of money you are going to receive. Make the entries in your books carefully so that accordingly you can do financial planning. Remember that mismanaged payables can even harm your business’s credit ratings.
6. Do away with paper documents
Of course, you cannot completely eliminate them because even if you implement a zero-paper policy at your office, you cannot stop the others from sending you paper documents. So, you cannot throw them away. But you can certainly scan them and store them online somewhere, properly catalogued. If you want to invest in an OCR (optical character recognition) technology you will also be able to turn the scanned documents into proper accounting data. Also, insist that you are going to send digital invoices and bills to all your customers and clients.
7. Hire a professional for your bookkeeping work
By qualification and profession there is a big chance that you are neither an account nor a bookkeeper. You may save a few bucks by doing bookkeeping by yourself but one of these days, you are going to commit a mistake that is going to cost you a lot more than you are saving by not hiring a bookkeeper. A professional bookkeeper will keep all your books in order. You won’t have to spend time learning bookkeeping and making sure that you are making correct entries.
8. Do not take petty cash casually
Petty cash is small amounts of money that you take from your business. You may suddenly need to spend money to buy snacks or order coffee for your office visitor or a faucet begins to leak uncontrollably and you need to quickly summon the local handyman. While you are busy taking care of your business, you may inadvertently end up ignoring to enter your petty expenses into your books. By the end of the year when you balance the books you will wonder where all that cash has gone.
9. Do timely tax record keeping
One of the biggest benefits of proficient bookkeeping is that when it comes to calculating and then filing your taxes, all your data will already be there. So, in the beginning of the accounting year itself, maintain your books in such a manner that most of the tax entries are in place automatically. This is easily achievable with the help of a trained bookkeeper.
10. Keep records of permanent and contract employees separate
In most of the cases, your contact employees will be delivering services from their own places, using their own tools. They may not even be spending the entire work day doing your work.
Your permanent employees on the other hand will be using your tools and resources. They will be using your office space and infrastructure. They will also be spending the entire day exclusively working for you.
Maintain separate accounts for different types of employees.
Bookkeeping is a repetitive, but an essential task. Ignoring bookkeeping is easier because you don’t face the repercussions immediately. But the consequences can be devastating for your business. Whether you decide to maintain your books on your own or with our help, set the ball in motion as quickly as possible.