As a small business, it’s important to pay attention in the bookkeeping process. How can you manage your business in terms of its financial through bookkeeping? Here are some tips to guide you as a small business.
The terms “bookkeeping” and “accounting” are frequently interchanged. In reality, bookkeeping is a small but important part of the accounting process.
Accounting is the process of using such data to determine a company’s financial position and make financial management decisions, whereas bookkeeping is the process of recording and reporting financial data.
How Does A Small Business Do Their Bookkeeping
A small business’s day-to-day finances are managed through bookkeeping. It contains the following items:
- Paying your bills
- Getting paid by clients and customers
- Ascertaining that your company pays the correct amount of tax
- Making a tax refund claim for your company (e.g. expenses)
- Payroll management to ensure that your employees are paid correctly
Three financial records are used by bookkeeping to track payments in and out of the business:
- Cashbook – This is where you track your cash flow (everything that comes in and goes out of your company’s account).
- Sales invoice – Keep track of everything you’ve sold, which includes both paid and outstanding debts.
- Purchase invoice – this keeps track of what you’ve bought (including services) and how you paid for it.
Tips How You Can Manage Your Small Business Particularly in Bookkeeping
These tips below will assist you in getting started with bookkeeping for your small business.
1. Keep track of all payments
Use your books to keep track of all payments and note when they were made or received so you can quickly locate them if you need to.
2. Decide on an accounting system
Because your bookkeeping will support your accounting, pick which method you’ll utilize right away. Income and expenses are recorded in traditional accounting at the invoice date.
They are recorded in cash accounting on the date you receive or pay the money.
3. Adhere to deadlines
Never pay late (particularly tax) and set your clients a payment date so you can properly hunt them down. Keep note of any late payers and, if they continue to fail to pay, consider terminating your contact with them.
The goal is to maintain a healthy cash flow, which is referred to as credit control.
4. Keep a record of your expenses
The next important tips for a small business bookkeeping is to lower your overheads, you can claim tax credits on a variety of company expenses. Receipts will be required to prove your claims, so keep them safe and organized in different company categories.
Keep business and personal expenses separate so you can quickly see which ones can be deducted from profits to save money on taxes.
5. Organize bank statements and invoices
Alternatively, don’t waste your bookkeeper’s time and money. Check that all bank statements and invoices (both purchase and sales) are present, correct, and in chronological order.
Otherwise, you’ll be paying your bookkeeper for time spent finding and organizing these data, which you could do yourself. Worse, if documents go missing, you may face a penalty for late filing.
Separate files for paid and outstanding purchase invoices (money you owe), then sort them alphabetically by supplier name. Remember to move invoices once you’ve received payment.
6. Create a monthly report
Creating reports at least once a month is the most effective bookkeeping approach to remain on top of your small business finances and avoid unpleasant surprises.
A profit-and-loss statement and a balance sheet should be included in your monthly reports at the very least. You now get a continuous report on how well your company is doing.
7. Consider to hire a bookkeeper if needed
If your company is just getting started, it may make sense to do your own bookkeeping.
Keep track of how much time you spend on the books each week as you progress. Calculate the monetary value of your time (for example, how much revenue you make per hour) and compare it to the cost of a bookkeeper.
It may only take a couple of hours for a professional bookkeeper to handle a month’s accounts, so it won’t be long until this is better value.
8. Use a reliable accounting software
It comes with features including recording transactions, generating invoices, generating financial statements, and also bookkeeping.
Find out more about Jurnal.
So, those are the tips for you especially if you run a small business and what you can do to make sure the bookkeeping runs smoothly.