Accurate and up-to-date business records can help you to make sense of your finances. Immaculate bookkeeping is essential for maintaining the financial health of your business.
If you don’t understand bookkeeping essentials, then your business could soon go down before it even has a chance to thrive.
Thus, here are 7 tips on how to keep books of a small business without facing much trouble:
1. Maintain all records thoroughly
It is vital to record all the business transactions like the receipts, invoices and expenses using either accounting software or manual bookkeeping.
Organising and keeping accurate accounting records will ensure that the financial condition of your business will not suffer. Your accounts will help you to monitor your income and spending. In addition, your receipts will also act as evidence in case of any dispute or VAT audit.
2. Track all your business expenses
Tracking all your payments and purchases, regardless of whether they are small or large, will allow you to forecast your future costs. This will help you to prepare strategies to deal with any unforeseen expenses.
Keeping track of your expenses and receipts will also enable you to claim VAT to reduce your overheads.
3. Using automation techniques
Automation can save you from spending hours manually crunching numbers. Using suitable accounting software as per your business needs can be a lifesaver for you.
Some of the factors that you need to consider before purchasing accounting software are:
- The pricing of the software
- Does it meet your business requirements?
- Customer support provided by the software
- Data security
- Storage and accessibility offered by the software
- Integration with other business software
4. Manage your cash flows
You can keep paying your bills if you have consistent cash coming into the business. But you won’t be able to pay money to anyone if the money coming in stops.
Monitoring your accounts and understanding the cash flow of your business will allow you to grab more opportunities and be ready for any unexpected shocks in the future.
You can maintain cash flow in your business by cutting unnecessary costs, using forecasting, managing your stock, etc. It is essential to review the cash flow of your business and spot the early warning signs to be prepared well in advance.
5. Reconcile your records monthly
Reconciling your records with the bank statement means examining your monthly business bank statement to see if the credits and debits on the account match with your financial records or not.
Reconciliation aims to get accurate and error-free records and get a clear picture of your business financial health. Reconciliation of your records will also assist you in detecting any unexplained payments or expenditures.
6. Staying ahead of the deadlines
Missing any important deadlines can mean a massive loss for your business.
For example, if you forget to collect payment from a client on the due date, it can lead to an unhealthy cash flow. Moreover, not filing your tax returns timely and making late payments to your Tax authority can get you charged with penalties.
Thus, it is essential to be strict with deadlines and set reminders to your calendar so that you can easily track any critical dates.
7. Seek professional help
With an increase in the complexity of the bookkeeping function, it becomes essential to hire the services of a professional bookkeeping firm to manage your business’s books. This will allow you to focus on the core activities of your business.
Professional bookkeepers will reduce the scope of error, take care of any unpaid invoices and manage the cash flow of your business. In addition, they will also save your time and money in the long run and help to increase the profitability of your business.
At 123Financials, we provide the best cost-efficient accounting services to our clients as per their business needs.
Things to keep in mind while maintaining your business books
- Keeping your personal and business finances separate is a must-follow step for every business owner. Setting up a different bank account for your business can help you to keep your business budget and finances in order.
- Maintaining an audit trail can help you verify your transactions’ accuracy and reduce the chances of any business fraud. An audit trail is a collection of documents that support the transactions that you enter into your accounting books.
- Producing monthly business reports can help you assess your business’s performance and timely formulate the strategies needed to make your business successful.
- It is easy to get distracted from bookkeeping but putting off bookkeeping till the last moment is a common mistake that you should avoid. Regular and timely bookkeeping will help you better understand your accounts and determine the financial position of a business.
If you want your business to thrive, it is essential to prioritise your business books and keep them updated and organised. The task of keeping books for a small business may seem overwhelming and challenging, but with the help of the right strategy, bookkeeping can become a lot simpler.