10 Bookkeeping Tips
Bookkeeping doesn’t have to be rocket science! It can seem overwhelming, but I have come up with 10 tips to help in your bookkeeping.
#1 – Go Paperless by Using Cloud-Based Accounting
Cloud-based accounting software can reduce your time spent on your bookkeeping. This can be a powerful tool to aid in entering financial information, monitoring expenses, and tracking invoices. The option of accounting software being cloud-based means it can be used anywhere remotely.
#2 – Find a Good Advisor
By finding a good advisor, you can focus on the core of your business. This can mean something different for each business owner. You may have an advisor to assist when needed and get advice from. Or this may mean hiring a bookkeeping professional to handle it for you.
#3 – Keep Personal and Business Finances Separate
Co-mingling personal and business expenses and income is a common mistake and can create more work in your bookkeeping. When they are not separate, you are not getting an accurate financial picture of what is going on in your business.
#4 – Plan for Major Expenses
Unexpected expenses are going to happen and planning for these major expenses will keep your cash flow from going negative during these times. This can be prevented by having a cash reserve for unexpected expenses.
#5 – Set Aside Money for Taxes
If you are self-employed or are a limited liability company (LLC), you are required to pay estimated tax payments quarterly. It is helpful to set aside money each month. If you have employees, you will also need to account for payroll taxes. These payments are due weekly, monthly, or quarterly based on the amount of your payroll obligation.
#6 – Manage Your Invoices
Sending out timely invoices is important to managing the cash coming into your business. It is also important to create accurate and detailed invoices for your customers and clients.
#7 – Keep Daily Records and Reconcile Bank Accounts Monthly
Keeping track of your transactions within your business is imperative to understanding your finances within your business. This will help you accurately categorize each expense. Each month it is important to reconcile your bank account to your accounting software. This ensures that all transactions are accounted for and the balance matches your bank account.
#8 – Avoid Cash – it is harder to track expenses
When cash is used in your business it is harder to track what the cash was used for and accounting for it in the correct category is challenging.
#9 – Go Over Your Books Weekly
It is recommended to review your books weekly to ensure all transactions have been categorized, invoices have been sent, revenue is properly accounted for, and all bills have been paid.
#10 – Check-In Monthly on Your Accounts Receivable
Each month you should review your accounts receivable and research the status on your outstanding invoices. By reviewing your invoices you can follow up on unpaid invoices and determine if they are uncollectable and need to be written off as a bad debt expense.