Bookkeeping is the record keeping of your business financial transactions. It is never the favorite of small business owners. However, the reality is if you own a small business, good record keeping is vital. Many start-ups, as well as existing business owners tend to neglect this aspect of their business because they do not always know how to go about it and where they know, there is not always time to do it. Most small business always think it is expensive to hire somebody to do it for them. By law, every business is required to maintain accurate and timely records.
Enough emphasis cannot be placed on how important it is to organize your accounting records from the onset by setting up proper books of accounts through the use of good accounting software.
Here are 7 simple tips to make record keeping easier and less stressful for you and your small business.
1. Have a business bank account(s)
Business Entity Concept is a concept in accounting which says a business must be distinguished from the owners. Keeping your business activity separate from your personal activity is smart business. Open a business bank account to account for your business activities like income and expenses.
2. Avoid cash
One of the principal reasons why small business owners find it difficult to keep proper records is that they spend cash without proper documentation before spending. Cash spent without records can easily be forgotten. Instead of cash, use your debit or credit card religiously. When you use cash you lose track of potential write-offs. If you have to pull money out of an ATM, note on the receipt the purpose of the withdrawal.
3. Devote time each week to take care of your books
If you maintain your books of account by yourself. Ensure you assign time each week to keep your account books. However, where you have somebody doing it for you. Take time each week to review your income and expenses, manage accounts receivable and payables. Regular reviews will let you know how your business is going and allow you to control cash flow.
4. Get accounting software that suits your business needs
If you are unsure which software to select, you may contact an accountant that can better advise you before you buy. We always encourage small business owners like you to use online accounting software One key benefit is that you can access your financials anywhere, anytime or have your bookkeeper or accountant check information for you. Your files will always be backed up regularly in the cloud. However, always ensure you keep backups of your financial data as an added security measure. With desktop software, you will have to get into a habit of regularly backing up your files. Desktop software also comes with the problem of initial outlay to buy the software, coupled with the problem of training and upgrading all the time
5. Stay on top of your tax and compliance obligations
Keeping good accounting records enables you to meet your tax obligations and regular filing requirements. This frees your business from payment of penalty and interest from tax authorities. You must also keep receipts for all acquisitions in order to support the claim on your expenses. If you employ staff, you must also register for a payroll tax, otherwise known as Pay As You Earn (PAYE) and start remitting on monthly basis. If you deal in vatable goods, your business accounting records will help a lot in filing your monthly Value Added Tax(VAT) returns. With the appropriate accounting program and setup, you can have this information at your fingertips. This way you create systems to help you streamline and automate your business processes for you to stay compliant.
6. Keep your accounting records
Section 331 of Companies and Allied Matters Act 2004 deals with Accounting records. The law makes it mandatory for every company to keep accounting records. Not only keeping accounting records but states that they must be sufficient to show and explain the transactions of the company.
The accounting records of your business must contain:
· Entries from day to day of all sums of money received and expended by the company and the matters respect of which the receipt and expenditure took place.
· A record of all assets and liabilities of the company
The type records you are required to keep and make accessible upon request in fulfilling the law are:
- Invoices and receipts you provide for sales or services rendered by your business.
- Invoices for goods, services or other business acquisitions purchased for your business.
- Records of payments made to employees plus payroll source deductions submitted on their behalf.
- Bank accounts and credit card statements
- All financial statements including profit and loss statement and balance sheet.
- Business Tax Return information.
- Records of stock purchases at end of financial year and asset register etc.
- Anything else with a monetary value to the business
The law expects you to keep your accounting records for six years
7. Get a good and experienced bookkeeper
As you expand your business you may need to engage the assistance of a well-trained and experienced bookkeeper. And why would you consider this alternative? Firstly, it’s a tax deductible service, secondly hiring a bookkeeper helps you focus on growing your business while ensuring your record keeping is up to date. It’s a healthy practice to meet all your tax and compliance obligations. It’s never too late, start now and take control of your business.