Millions of small business owners struggle to complete their bookkeeping on a monthly basis, and for many of them, it is an unwelcomed chore. Most people aren’t “accounting” or “financially” focused people, and most small business owners would much rather spend their time doing the fun part of their business which is providing the service or selling the product they went into business for.
So, we’ve compiled 5 bookkeeping tips and accounting basics that will help set you up for success:
- Software – QuickBooks Online is our most recommended software for small businesses. Not only is it intuitive and easy to use, but also its cloud-based application enables you to access your financial data from anywhere. Also, the software is scalable, offering 3 different tiers allows you to upgrade based on your needs as your business grows. Start with the basic version, and upgrade to more robust versions as your business requires it.
- Consistency – There is no principle more important in accounting and bookkeeping than being consistent in how you record your revenue and expenses. Therefore, it is important to set things up the right way – right from the start. For example, constantly changing how you categorize your financial data will make it less valuable because you’ll be unable to do the historical comparisons of the data that will help you better understand patterns in your business.
- Timeliness – At VaroTeam, we tell our clients that completing their bookkeeping in a timely way is essential. We consider timely to mean completing it by the 10th of the month for the previous month. Remembering every purchase you made for your business can be difficult, especially if you have a high volume of transactions. Keeping up with your bookkeeping helps maintain a process that is cleaner and data that is more accurate. The longer you wait to enter transactions, the harder it will be for you to remember what happened.
- Separate – Never mix your personal and business expenses because it will only make them more challenging to handle. Not only is it easier to keep your records accurate if you are dealing with one account, but it will also force you to stay organized. Also, there is something called the “corporate veil” which is the protection your corporation gives you from individuals going after your personal assets in the event of a lawsuit. When you mix your personal and business you have pierced that veil, and you have opened yourself up to personal liability. Just don’t MIX expenses!
- Collect – You did the work; now did you collect the money for that work? Checking in on your Accounts Receivables on a regular basis is one of the most important things you should do for your business. Having a client owe you isn’t the same thing as having the money in the bank. Without collecting on receivables, you may run into cash flow issues that will prevent you from paying your bills on time – so don’t let it slide.
If you follow these tips to help keep your books in check, you will have the financial records you need to make better business decisions. Of course, once you have done the work of entering your transactions make sure you review your reports for accuracy. We recommend that clients do a horizontal analysis of the data by running the P&L by month and looking for consistency in the revenue and expenses. If there are large variances from month to month, you may be looking at a mistake – so dig deeper and fix the problem before time passes.
We hope these bookkeeping tips help you! If you’re in need of additional assistance, our financial experts can help!