Business owners can be experts at selling their products or services, building effective teams, and attracting more customers – but the specific skill of bookkeeping doesn’t come easily to many of them.
However, it is impossible to undermine the importance of good bookkeeping to the success of a business, and no owner or manager can avoid this task for too long. After all, poorly-tracked finances can push your business into problems such as poor cash flow, improper tax filings, and much more.
Therefore, as a business owner, keeping accurate financial records and filing proper taxes should be a part of your bookkeeping habits. If you choose to handle this side of business yourself, make sure you have the training and resources to do it right.
You don’t have to be an accountant to keep a check on your business’s cash flow, but as long as you are interested in studying financial accounting, it’s possible to excel at the task and take care of your business as only you can. If you are not interested in managing your books you may want to consider hiring a virtual bookkeeper.
Also, adopt the following habits to simplify the bookkeeping and accounting side of your business.
6 Bookkeeping Tips For Your Business
These tips will tell you all about the basics of bookkeeping and how you can handle it to increase your knowledge and operate your business with skill.
#1 Keep Your Personal And Business Finances Separate
Business owners must open a new bank account for their business and keep their business coffers separate from their personal funds.
Online bank accounts are preferable as they provide easy and quick accessibility to log in and make payments or keep up with your bookkeeping records.
In fact, get a business debit or credit card, so you never have to use your finances to carry out business transactions – this is an easy way of clearly differentiating between personal and business expenditures.
Also, since you are your own boss, why not make it official and decide on your salary?
Write yourself a cheque every month and then stick to it, so you don’t go dipping into the company account when an unexpected personal expense arises. Once you have the ‘salary,’ the rest of the business account and the credit line is off-limits.
Not keeping these things separate can cause some issues and may even cause you to get audited by the IRS. If this happens you may need to hire IRS audit help to correct the situation and avoid any penalties.
#2 Keep Track Of Your Expenses
You cannot know how much you are spending if you don’t keep track – this may also result in missing tax write-offs that could’ve been good for the business.
Now it can be straightforward to account for credit card purchases as you can have both receipts and monthly statements to verify them. But you need to be careful with cash transactions as it’s easy to miss them if not tracked properly.
You might want to keep a notebook to log cash expenses as and when they happen, or you could also save all the receipts in a booklet along with transaction details, totals, and signatures if needed.
These records will come in handy come audit time. Also, notes for client meetings, lunches, events, or car mileage can be documented to substantiate your expenses for your tax records. If you use the lease accounting tool it will help you track all of this.
#3 Understand Monthly Bookkeeping Reports
Not many business owners are aware of what they are doing until it is too late, and they find themselves with no money and huge debts.
You can avoid this situation by being proactive, keeping your bookkeeping system up to date, and ensuring that your Income statement, cash flow statement, and balance sheet are accurate as can be.
If that sounds like too much work, you may need to sign up for online bookkeeping services in Australia. One of the most popular routes is the Certificate IV Course in Bookkeeping which can teach you how to prepare financial reports and statements, maintain payrolls, and process financial transactions.
#4 Allocate Time To Review Books
As a business owner, you might be tempted to push the books aside and focus on the daily grind, but if you want to keep your business secure, remember to keep your financial records straight and prioritize your books.
Reviewing your books on a daily or at least weekly basis will keep you updated about the state of your business. You’ll be able to manage your cash flow effectively, understand your expenses, and remain in the loop with current invoices.
Reviewing will help you to track down all the expenses and income generated by the business either through cash or credit card transactions.
If you have trouble understanding what’s going on in your financial statements, sign up for online courses in Australia to learn more about bookkeeping and how to review them effectively.
#5 Remain Vigilant About Deadlines
If you are always busy with your business, it is easy to lose track of time and miss deadlines, especially on taxes.
Try setting reminders – add tax return due dates and other prompts on your calendar to make sure that you don’t miss any appointments.
It’s easy to settle into a pattern of lateness when you are the boss – and that’s precisely when things can start going wrong. But more importantly, forgetting about the critical dates also inconveniences your staff and customers.
All you need to do is plan ahead, set the time, and keep the required money aside for your business taxes. That way, you will not be charged extra for missing out on your taxes, and your business will remain clear of deadline-related penalties.
#6 Pay Attention To Receivables
Getting paid for running a business might be the most exciting part of entrepreneurship, but managing debtors is never fun. When an invoice is issued, your business records a receivable, which means that a customer now owes you money that you will receive at a future date as agreed upon.
Check these listings regularly to ensure that you collect all outstanding dues on time.
In case the customer pays you, the amount will be applied to the invoice, and it will be marked as paid. But this can be challenging when you are dealing with many orders at a time.
You might leave accounting for customer deposits for a later time because when the tax season approaches and your books don’t match your accounts, this will generate a receivable report that doesn’t match.
Just because you had no time to clear those deposits, you are now obligated to pay more on your tax return. You need to keep track of your transactions as they happen and not leave them for a later time. This will save you a lot of time as well as tons of invoicing in the long run.
Bookkeeping and accounting might seem like mundane tasks that are often too boring for a go-getter business owner.
However, the fact of the matter is that these form the backbone of a successful business, making it imperative for entrepreneurs to study these subjects to keep their businesses steady and prepared for any financial emergency.
No matter what your inclinations are, dissect your finance-related issues and keep a thorough record of them. Stay updated on your profits, expenses, and receivables to avoid tax penalties, and remain vigilant about deadlines.
All you need to do is invest some of your time in keeping track of your expenses, income, and other transactions regularly and save yourself the headache of running around when the tax deadlines start to close in.
Neglecting this will undoubtedly cause many problems for your business; therefore, you need to make sure that you employ the six bookkeeping habits mentioned above, for the prosperity of your business.
However, if you are not a ‘numbers person and need expert guidance, enroll in an online course that lets you learn at your own pace. Some of the best online courses on bookkeeping and accounting in Australia are available at MCI Institute – we are here to help you learn all there is to know on the subject.
Get in touch with us today to find out how we can help you excel at bookkeeping.