20 Essential Bookkeeping Tips for Small Business
1. Record each and every one of your transactions
To know exactly how your business is doing financially, you need to record every cent that comes in or goes out. Create the habit of recording transactions directly after you make them. Even the smallest amounts can put your books out of balance. Over time, your business could miss more and more money with no record of where it went. Put them down instantly, so you won’t forget about them and keep your balance sheet up to date.
2. Update your books frequently
Regularly set aside time to update your books. For the most accurate numbers, it’s advisable to update your records every day. Although the task takes time, refraining from it on a regular basis may lead to various accounting problems.
It is essential to know how your business is performing. Without accurate, real-time bookkeeping, financial issues can easily arise. If you lack the time or skills to do the bookkeeping properly yourself, you can always consider (partially) outsourcing your bookkeeping at reasonable costs.
3. Keep track of important dates
Know when to pay your bills, when a customer’s payment is overdue, and when it’s time to review your financial statements. Consistently put down the dates for your accounting tasks and stick them on your calendar or set reminders on your computer. And don’t forget to include dates on which taxes are due and when you should file certain reports.
One of the most common mistakes that small business owners make is underestimating the time and energy required for bookkeeping. As a result, they often fall behind on payments or make costly errors. If you find yourself frequently behind schedule, consider the help of a professional bookkeeper.
4. Learn key information
As a (small) business owner, make sure you grasp the core concepts of accounting. A basic understanding of the common terms, formulas, and reports is not nice just “nice to have.” You risk of making costly errors if you don’t.
Learn the most common accounting terms and teach yourself how to use basic financial ratios. Look at financial statements and learn what to use them for. When you understand how accounting works, you can more successfully manage your own books.
5. Review your reports regularly
No business owner likes to make decisions based on inaccurate knowledge. Prevent this by reviewing your financial reports regularly and create a schedule for it (e.g. look at your income statement at the end of every month).
Every report has different information and is here to help you make different decisions. However, reports are useless if you don’t look at them frequently enough. Examine them over time to know exactly how your business’s financial health is faring.
6. Communicate well with your bookkeeper
Your business could suffer from insufficient communication between you and your bookkeeper. Discuss the means of communication which both of you can be comfortable with and keep him or her integrated and involved with your business activities. This way, your bookkeeper can create financial statements that reflect your business’ true operational needs.
7. Learn the basics of record keeping and accounting
Purchased small business accounting software and thought it would solve all of your problems? Even with the best software, you need some basic knowledge of bookkeeping. Especially to stay in line with regulatory compliance as there is a substantial difference between record keeping and accounting.
Software alone does not eliminate your accounting problems. If you need support, consult with a professional.