7 Small Business Bookkeeping Tips
Does talk of receivables and cash flow send you running? Whether you operate a franchise or a service firm, keeping the books is vital for the health of the company. Follow these tips to understand and embrace the power of small business bookkeeping.
Introduction to Small Business Bookkeeping
Bookkeeping is largely a transactional process that involves:
- Billing customers
- Recording payments
- Processing payroll
- Tracking receivables
- Paying vendors
- Generating financial reports
Similar to sales calls and customer service, quality bookkeeping is an essential part of day-to-day operations. For example, it lets you know whether you have enough cash on hand to make payroll and keep creditors away. It also allows you to satisfy tax authorities and plan for the business’s future.
Small Business Bookkeeping Tips
To reap the biggest benefits, organize and systematize your bookkeeping efforts. SCORE, an American non-profit run by business leaders, recommends the following small business bookkeeping tips:
- Stick with one accounting system. Companies with no inventory, and less than $5 million in sales, generally prefer cash accounting. Under this method, income counts when money lands in your hands, and expenses count when the money flies out again. Alternatively, accrual accounting lets you log income and expenses at the time of the transaction, regardless of when payment occurs.
- Do a little each day. Would you rather spend a Saturday slogging through receipts, or spend just 10 minutes a day doing your books between phone calls? Limit the burden of bookkeeping by maintaining accurate daily records. You learn to spot errors and fraud more quickly, and you gain a reliable picture of the business.
- Let software do the work. Ditch the paper and spreadsheets. Invest in small business accounting software, such as QuickBooks or a cloud-based program, that offers step-by-step guidance on how to make entries, print checks, save reports and prepare tax documents.
- Leave breadcrumbs. With proper record keeping, you can trace every transaction to its source, including deposited checks, invoices and purchases. If your books were destroyed tomorrow, the best audit trail would help you reconstruct transactions from the past year or more.
Bonus Tips for the Busy Entrepreneur
- Avoid cash. Cash gets lost and stolen. Employees forget to request or issue receipts. Take advantage of checks, debit cards and credit cards instead. You get the who, where and when of an audit trail without much extra effort.
- Check invoices regularly. Know how much money clients owe you, how much you owe vendors and when these different transactions are due.
- Work with a professional. Doing everything yourself may be cheaper, but the self-reliant approach creates headaches, compliance problems and tax issues. Ask an experienced bookkeeper to review your records on a monthly basis, or avoid the hassle completely by keeping an accountant on retainer.
These small business accounting tips may not eliminate your dread of bookkeeping, but they can take away some of your concerns. Make a few changes today to boost profits and improve how your business functions.
At Verdeja, De Armas & Trujillo, LLP, our team of Miami accountants is dedicated to providing personalized and financial guidance. We provide accurate and comprehensive financial statements as well as in-depth business analyses. Contact us today for a small business accounting consultation.