These small business accounting tips will help you get your books up to date and keep them that way in less time. They will help you maintain financial control and help you manage your working capital more effectively and securely.
- Before you consider recording any transactions in your ledgers, organize your paperwork in your files according to these accounting basics. It will save you time, and time is money.
- Calculate how much you earn in your business per hour. If the answer is more than it will cost to hire a professional bookkeeper, hire one. Otherwise, please process the transaction yourself. Hire a tax accountant to do your year-end return so you don’t have to keep up with arbitrary government rulemaking and miss out on tax breaks.
- When you have your paperwork in order, consider how you will record your transactions. This could be in a traditional handwritten ledger, or more likely using software. Understand your accounting software requirements before purchasing anything to avoid dissatisfaction.
- If you don’t have a lot of money to invest in financial software, then consider using open source accounting software. This can be obtained for little or no cost. Click the link above to learn about the advantages and disadvantages of using open source.
- Once you’ve decided what to record your transactions on, follow these basic bookkeeping tips to ensure you record your transactions as efficiently as possible.
- Make sure all cash is accounted for by performing a bank reconciliation. Make sure the transactions recorded on your bank statements are recorded on your books and that the balance on your statement matches the balance on your books. Make sure you know the amount of undisclosed and unpresented checks (checks) which will account for any actual difference between the statement and the account in your general ledger.
- Similarly, make sure all petty cash is accounted for by counting the cash in your till and recording it in your cash book.
- Perform routine counts on items you have in stock and make sure what’s recorded in your books matches how many you have on the shelf. This is an area where tight control pays dividends as unexplained differences often occur due to sales “sampling”, spoilage, quality defects, returns, etc. This is an important area to get right, as any differences will need to be reflected in the financial statements and will usually directly affect the bottom line.
- Keep a record of Fixed Assets. While not a general ledger on your books as such, a fixed asset register is essential for keeping track of essential business equipment. This means the cost, the location of the depreciation, the date of purchase, and the remaining life. The value of these assets are carried on your balance sheet. It can be surprising how, as you get older, things you thought you were gone! Especially small high value technology.
- Follow these small business accounting tips, but don’t forget to use the information in your books wisely. Working capital management is how you manage your daily, weekly, and monthly cash, receivables, vendor payments, and inventory/stock control to stay in business and really make a difference to the bottom line (the bottom line). profit line) of your business.