Business owners face many challenges when it comes to running their venture. It is so easy to get overwhelmed by work that basic bookkeeping tasks can be forgotten.
Here are 10 bookkeeping tips for all small businesses:
1. Track all sales and purchase invoices
The most obvious yet crucial task you need to start off with is recording ALL your incoming and outgoing transactions. Make sure that each purchase invoice includes the business person’s name, address, phone number, and email so that it can be easily identified in case of an error or discrepancy later on. While any system for this would work, we suggest using Quickbooks Desktop Pro. Also, keep track of incoming money by requesting payment receipts from customers every time they make a payment. It can be very tedious work, but it will help you establish effective bookkeeping practices.
2. Keep a list of bank statements
Banks usually give detailed transaction records upon request, but it is still recommended that you maintain personal listings to avoid confusion in case of a discrepancy.
3. Start filing your receipts
Create folders for each year and label them by month. Every time you spend money, make sure to file the receipt in the corresponding folder immediately after filling out the transaction details into your accounting software or ledger book. This will help you save time when preparing yearly taxes as well as making it easier for you to find important financial documents when needed.
4. Record asset and liabilities
Create a list of all your assets (inventory, equipment, furniture, etc.) along with their corresponding value using the standard cost method. A simple piece of paper would work just fine so long as you update it every time any changes occur in your assets or inventory. Liabilities are just as important. Make a list of all dues payable and unpaid, bills due for the coming year, etc. to calculate your business’ net worth.
5. Record creditor transactions
Keep track of ALL incoming and outgoing payments made to suppliers, employees, landlords, lenders (if any), government agencies (taxes owed/paid, etc.), and other parties that you owe.
6. Record all account transfers
Make sure to record ALL transactions involving money going in or out of your business accounts (cash, bank) whether it is a transfer from one account to another or a withdrawal/deposit. You can simply use a ledger book or notebook to keep track of these transactions.
7. Prepare a Profit and Loss Statement
A revenue statement is a detailed account of all income generated by a business during a specific period of time (month, quarter, etc.). It should also include other sources that could potentially affect the net profit/loss of the business such as tax refunds, discounts from suppliers, allowances from customers, etc.
8. Check for hidden tax deductions
Know what deductions are legal and how to claim them. The last thing you want to deal with is the IRS, and you certainly don’t want to leave any money on the table that could be saved if it qualifies as a money-saving tax-deduction.
9. Know your company’s financial health indicators such as credit rating, financial ratios, and cash flow
Another crucial step you must take is to understand what it means if a certain indicator – such as your debt-to-equity ratio – is not in your favor. It would be best to consult with a professional bookkeeping service regarding all these so that they can provide regular advice on how you can improve the overall financial health of your company. A good way to monitor this is by checking your balance sheet and income statement regularly. Not only will it allow you to see where you stand financially, but also ensure that there are no errors that could potentially you money or legal problems.
10. Keep track of filing deadlines
Last but not least, always make sure that important dates such as the deadline for creating financial statements (e.g. year-end) are kept on top of your list. It is also important to file your taxes every quarter so that you will not be constantly worried about whether or not you have met deadlines regarding tax payments. Furthermore, if the IRS tries to contact you for some reason, make sure that they can easily reach you by registering an official business address and phone number.
Stay on top of bookkeeping tasks and tax deadlines
Small businesses often have to juggle bookkeeping tasks with their day-to-day operations. This can be challenging, but following the tips above will keep you on track so that you can stay on top of bookkeeping tasks and tax deadlines. With a little bit of time invested in these steps, you should find your books will become much more organized and easy to manage! Of course, if you still don’t have the time for these tasks, we strongly recommend hiring a professional bookkeeping firm to do it for you.
