Keeping complete and accurate track of your business finances can be tricky. Even if you only have a small company, keeping accurate records and financial statements is important for several reasons. It will help you prepare your tax return, assist with loan applications, manage risks, and track changes in your business so you can make informed decisions about future strategies. This article will walk you through 4 simple tips to improve your small business bookkeeping.
- Track revenue and expenses- The first thing you need to do is track your revenue and expenses. You can do this in several ways. You can use a spreadsheet, good accounting software, or even keep a basic set of accounts by hand. Whatever method you choose, you must record all your transactions. This includes any money you receive from customers and any money you spend on business-related items.
- Set up a small business accounting system- As we have mentioned, there are many ways you can track your business’s finances. The method you choose depends on the size of your business, the type of business you operate, and the complexity required to manage the financials of your business. You can choose to keep it simple by using a spreadsheet such as Excel. This is a great method for small businesses with straightforward financials. If you are operating a larger, more complex business, accounting software may be a better option.
- Record all your invoices- No matter what type of business you operate, it is important to record all your invoices. This will help you track all the equipment and services you have provided and the money you are owed by your customers. You can record your invoices manually or use accounting software to track them electronically. You should record the date the invoice was issued, the date it was due, and the amount owed by the customer. In addition, you should record the name of the customer and the reason for the invoice. Depending on your business type, you should also retain a copy of the invoice for your records. It will help you track how much money you have earned from the job and how much you’ve spent on supplies or services associated with the project. Besides the receivable invoices, you must also keep track of your payable invoices representing the amount you have to pay to your vendors/suppliers.
- Use the information to run financial statements- As you record your invoices and track your expenses while managing your small business bookkeeping, you can use the information to produce financial statements. This can be helpful for some reasons. Financial statements represent your business’s financial health at a particular moment. For example, financial statements can be used to assess the risk associated with your business or to apply for a loan. You can also use them to prepare your income tax return. You can produce financial statements manually or electronically. Manual methods include keeping a journal or a ledger, whereas automated methods include using accounting software such as QuickBooks to produce financial statements.
Bookkeeping is an essential part of any business’s operations. If done well, it can provide valuable insight into your company’s overall financial health. However, keeping accurate financial records is not as simple as recording a few daily transactions. It is a process requiring time, dedication, and organisation. If you do not have the time or patience to do it correctly, you may consider hiring outsourced accounting and bookkeeping experts. However, you can also choose outsourcing as a cost-effective option. The most common business aspects are outsourced accounting, bookkeeping, AP, AR, and outsourced payroll. This way, business owners can devote full attention to core activities while the experts manage the rest.