Lack of proper and effective bookkeeping is a persistent and growing problem for micro, small and medium enterprises (MSMEs).
Fortunately, however, small businesses don’t have to suffer from a lack of effective bookkeeping once they know how to observe and carry out these seven ways to effective bookkeeping.
That’s what you’ll learn about in this write-up and other related topics.
Specifically, you’ll learn how to organize your information and records properly for effective reference.
You’ll also find out why you should not venture into doing bookkeeping by yourself. And you’ll even discover why you need to use software and the right one at that.
So, without further introduction, let’s jump in with a discussion of ‘Do not handle bookkeeping by yourself’.
Do not handle your business bookkeeping by yourself.
There is a tendency for you to be tempted to do your bookkeeping by yourself due to reasons such as ‘I have small transactions’, ‘I cannot afford to pay accounting fees’, ‘My business is small’. Despite the fact that all these reasons are tenable and genuine. This does not mean you cannot make an arrangement with an accountant who can help you.
Doing the bookkeeping by yourself will cause a distraction from doing what you ought to do as an entrepreneur. Carrying out your entrepreneurial duty might disturb updating the account regularly. Capturing the transaction data is another great issue most self-employed doing bookkeeping by themselves always face and thereby losing sight of some transactions.
Use the right bookkeeping software.
This an age of technology. You need to use software to do your business bookkeeping. There is two types of bookkeeping software; the off the shelf and cloud accounting software. Off the shelf is the accounting software that sits in your computer while the cloud accounting software which is also called online accounting software and web-based accounting software.
The cloud accounting software is better than the off the shelf software because it makes it easy for you to see whatever your accountant is doing wherever you maybe once there is an internet connection. With the online accounting software, you do not need to invest in accounting software or spend money on updating and training of staff. You just need to subscribe on a monthly basis.
You can easily get the right one that is suitable for your business.
Organize Your business records properly.
You need to organize your business records into the right category and classification for easy reference. This will keep your recording simple and consistent for anyone who takes over your bookkeeping work.
Keeping it simple in terms of where to record and file each supporting document for each type of transaction. If you are not experienced in this, you will need the assistance of an accountant or bookkeeper to do this for you.
It is expedient that this is done properly for the purpose of tax matters.
Separate your personal and business finance.
Even though you are self-employed, it is a good practice to open a separate bank account for business transactions.
This will make your bookkeeping job easier and make everything clearer. It will enable you to know whether the business is sustainable or not.
As much as possible refrain from using the money of the business for personal matters. Decide your remuneration from the business and ensure you do not draw more than your remuneration. Discipline is very important in this matter.
Ensure your books of accounts tally with your business bank account.
In relation to the above, it is very important to make sure that what is in the bank statement is the same as in what is in your books of account. As long as the numbers tallied, you can rest assured that there is no way you can miss out on any payment or receipt.
This will also help you if the tax authorities come for an audit.
Back-Up Your Source/Supporting Documents.
Supporting documents like the sales invoice, purchases invoice, vouchers, and tax records needs to be kept properly from destruction by fire, floods, and others.
It is in this wise that in these days of cloud computing, your supporting documentation should be scanned and kept in the cloud that is online. This is very important for future reference in your business. And it would also be of use in case of any tax audit or investigations.
Ensure Regular Meetings with Your Accountant.
Having effective bookkeeping for your business is your responsibility as the director of your company as it is laid down in various business and tax laws of different country. Even where you outsourced your accounting and bookkeeping of your business to a professional accountant, you owed it a duty to know what he or she is doing, that is the reason for the regular meetings. The meetings are for review of the system of recording and reports of the operation of the business.
You just discovered seven ways to have effective bookkeeping which can help you increase your profitability and growth of your business.
However, a word of warning – just knowing how to have effective bookkeeping isn’t going to give you good bookkeeping that tracks your income, expenses, payments, and receipts.
That’s because the key is that you need to take action on what you just learned. And that’s I encourage you to read this blog again, review the seven ways, and then start implementing them right away. Because the sooner you do, the sooner you’ll start enjoying generating reports to make decisions in your business.
Are you having any problem in implementing any of this, please comment below and let us know your challenges? And if you have an effective bookkeeping system in place, share your experience.