Many people say bookkeeping is the most frustrating aspect of business management. Although most entrepreneurs have great memories, it simply isn’t possible to track all the financial details of your business in your head. You will need an organized system.
Being organized with your financial details will help you keep your budget goals aligned with other strategies. It can also help you determine the seasonal flow of your business. For instance, some businesses may experience huge profits during the Christmas season, and others may do better during the summer months.
Why it Matters
This type of information can help you prepare for the ‘low’ periods, and in the end, careful preparation can improve overall profits. In addition, detailed recordkeeping can help you better prepare for tax time. If you keep organized records throughout the year, tax preparation is much easier.
Things You Can Do
It’s easy to understand that consistent recordkeeping can be stressful. But at the same time, it is clear that keeping ongoing organized records is extremely beneficial. With that in mind, the following bookkeeping tips are intended for those who are not exactly thrilled with keeping books, but who have to deal with recordkeeping anyway. If that sounds like you, keep reading!
Bookkeeping Tip 1: Maintain daily records.
Recording your expenses as well as any deposits daily will keep your account precise and balanced. Therefore, you can easily see what funds are available at any given time. If you spend just a few minutes each day to update the records, the process is simple. At the end of the month, your bookkeeping records will be complete and accurate. You will simply move the data to the next month.
Expenses: It’s easy to overlook something that could turn out to be a tax write-off. That’s why it’s important to track everything. You can always sort through them with a fine-toothed comb later. If you use your vehicle for business purposes, track the mileage. This even pertains to trips for something as simple as printer ink, pens, and paper. Keep the receipt for the ink, pens, and paper. If you have a meeting over lunch or coffee, include that, too. The point is, get in the habit of documenting everything.
Deposits: Some business owners may find they need to ‘help’ their business out with a cash infusion from their own savings account or a loan or other funding. Unless carefully noted, these deposits can mistakenly be recorded as income. It is important to develop a habit of carefully recording deposits. Ensure that only income is recorded as income. At tax time, you don’t want to pay taxes on a loan from your own savings account.
Bookkeeping Tip 2: Plan for major purchases and expenses.
Every business has to make major investments from time to time. This may be in the form of new electronics or business opportunities. If you study the flow of your finances, it becomes easier to plan for expenses. This means you can avoid the hassles of rushing to apply for a loan or other unpleasant funding arrangements.
Bookkeeping Tip 3: Monitor invoices closely.
It’s easy to overlook invoices that become late and overdue. Develop a system for sending out second notices, or even making phone calls to persons that are late with their payments. You should also consider a penalty system.
Last Things to Consider
While these tips will help you keep records in an organized manner, there are easier ways. For instance, you could consider outsourcing some or all of the recordkeeping responsibilities. Another option is to buy software programs that can help you with the process.
Whatever you do, you need to be consistent and organized with your recordkeeping efforts. It will make a difference in your day to day finances as well as at tax time. Give it a try!
Debbie Allen is an online marketer with a background in Organizational Development. She is also a content writer and blogger. Debbie often writes about reputation management, SEO, and other topics related to small business management.