Top 10 Small Business Bookkeeping Tips
These small business bookkeeping tips will help you get your books up to date and keep them that way in less time. They’ll help you maintain financial control, and help you manage your working capital more effectively and securely.
- Before you contemplate recording any transactions in your ledgers, organize your paperwork in your files according to these bookkeeping basics. It will save you time, and time is money.
- Work out how much you earn in your business per hour. If the answer is more than what it will cost to hire a professional bookkeeper, then hire one. If not, then do the transaction processing yourself. Get a tax accountant to do your year end filing so you don’t have to keep up with arbitrary government rule making, and miss out on tax allowances.
- When you’ve got your paperwork in order then consider how you’re going to record your transactions. This could be in a traditional hand written ledger, or more likely using software. Understand your bookkeeping software requirements before you buy anything to prevent dissatisfaction.
- If you don’t have much money for investing 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 the advantages and disadvantages of using open source.
- After you’ve decided what you’re going to record your transactions in then follow these basic bookkeeping tips to make sure you record your transactions in the most efficient manner possible.
- Make sure all cash is accounted for by performing a bank reconciliation. Ensure the transactions that are recorded on your bank statements are recorded in your books, and the balance on your statement is in agreement with that in your books. Make sure that you know the amount of any uncleared and unpresented checks (cheques) which will explain any actual difference between the statement and the account on your ledger.
- Likewise, make sure all petty cash is accounted for by counting the cash in your cash box and agreeing it to your cash book.
- Perform routine counts on items you carry in stock, and ensure that what is recorded in your books agrees with the quantity you have on the shelf. This is an area where strict control pays dividends as unexplainable differences often occur usually due to sales ‘samples’, spoilage, quality defects, returns etc. This is an important area to get right as any differences will have to be reflected in the financial statements and usually affect the profit line directly.
- Keep a Fixed Assets register. While not a ledger in your books as such, a fixed assets register is essential to keep track of essential business equipment. This means the cost, the location the depreciation, the purchase date and the remaining life. The value of these assets are carried in your balance sheet. It can be surprising how, as you grow, things you thought you had have gone! Especially small high value technology.
- Follow these small business bookkeeping tips, but don’t forget to use the information kept within your books intelligently. Working capital management is how you manage your daily, weekly, and monthly cash, debtors, supplier payments and inventory/stock control to keep you in business, and really make a difference to the bottom line (the profit line) of your business.