It is essential to maintain accurate financial records, whether you manage a small company, partnership, private finances or a trust. Smart business owners are diligent in maintaining their expenses and up-to-date records. Here are five tips to help you with your bookkeeping.

Why Is Bookkeeping Important?

Bookkeeping is a valuable system that tracks all your accounting records. It helps with payments, expenses, tax obligations and any other financial aspects of the company.

Developments in accounting software have made simple bookkeeping for a small business easy and doable for even the most novice business owner.

Understand the Basics of Bookkeeping

Before you get started, you must understand the very basics of bookkeeping.

Even if you have an accountant or tax expert managing your books, understanding your financial obligations will help if you run into any tax issues.

Tips for Managing Your Books

1) Hire a Professional Bookkeeper

If you are stressed about handling your business finances, consider outsourcing your bookkeeping to a professional. If you try to do bookkeeping in-house, you may be wasting time and resources, or misallocating resources, causing a bookkeeping disaster.

Small business owners are often better off focusing on the strategic and management aspects of the business and should leave certain work to trained professionals.

That said, if the business is small and just starting up, expenses may be an issue. In that case, small business owners should educate themselves to manage their books.

2) Get a Separate Business Bank Account

Separating business and personal finances should be the first step when establishing a new business. Keeping these accounts separate is beneficial in several ways, including:

  • Not blurring the lines between expenses that may trigger an audit.
  • Limiting personal liability if something happens to your business or you get sued.
  • Easily tracking expenses (both personal and business) for bookkeeping.

It is best to set everything in place from day one, linking phone and internet accounts to a business credit card.

Opening a separate business account will also help you develop business credit, which is kept separate from your credit score.

A good business credit score can help reduce insurance policy rates and help with loan applications.

3) Track your Income and Expenses

Individual transactions matter as much as your overarching financial trends.

If all expenses and income streams are tracked, it will be easy to identify areas in the company that require support and areas of growth.

Bookkeeping software programs (like Xero bookkeeping services) are beneficial as they can be customized to track once-off and recurring expenses and all revenue streams.

If you opt out of using software, then spreadsheets or even pen-and-paper can be handy to track your business expenses and revenue.

Don’t be afraid to use tools to automate processes – it will free up more of your time.

4) Schedule Bookkeeping and Set Reminders for Important Deadlines

If you dread doing your books, it may be tempting to keep postponing. To avoid this, try setting dedicated bookkeeping times. It may be a good idea to set aside time whenever your credit card statements are due.

You can go over your month’s transactions and verify them during this time.

If you are not already using a bookkeeper, track the time to balance the books. This will help you determine if it is worth the struggle for you or best to appoint someone to prevent you from wasting time.

It will help set reminders when you have important financial commitments or expenses, especially if you are not using automated software.

This will help to prevent late payroll payments or being tardy on business invoices. Use online calendars, phone reminders, and even sticky notes to help you stay organized.

5) Reconcile Financial Records and Accounts Each Month

Perhaps you are tempted only to do bookkeeping once a year to prepare for tax season?

Understandably, this will be a moment of dread for any business owner as it means sorting through a year’s worth of receipts, invoices and expenses.

To avoid this, sit down for a few hours each month to balance your books.

Find What Works and Stick To It

These tips are only suggestions and guidelines. You should find the best system that works for you or adapt some of these tips to suit your needs.

The best system for you is to use it in the long run.