According to an article by Michael Flint entitled “Cash Flow: The Reason 82% of Business…
Given the multitude of different tasks involved in managing your own business, it’s not uncommon for financial bookkeeping to be put on the backburner. However, like it or not, this mission critical function is a key component to small business success. Even for those who aren’t numbers savvy, some basic tips and techniques can go a long way in making the process easier. Here are six small business bookkeeping tips that can help keep you in the black.
Separate Your Finances
When your business is just starting out, it’s tempting to co-mingle personal and business finances. While this is not uncommon practice, it is in fact a bodacious blunder. By making it that much more challenging to properly isolate business expenses, you are potentially setting yourself up for significant tax headaches and profitability problems down the road. As soon as you form the legal structure for your business, it would behoove you to set up a business bank account. In addition, it would also be wise to obtain a business credit card to further divide finances and serve to build up your business credit.
Automate Your Accounting
Today’s bookkeeping and accounting software applications simplify and streamline what was once a tedious, time-consuming process of compiling and reconciling data. Cloud-based software gives you added flexibility by allowing you to access your financial data remotely from multiple different devices. It also bolsters reliance as your information is backed up to the cloud as opposed to a hard drive which can be prone to malfunction. Banking online and syncing your software with your business bank account is another way to enhance business efficiency while ensuring your records are always up-to-date.
Track Business Expenses
Thanks to the conveniences of modern technology, it’s now easier than ever to compile, agglomerate, and store data in one central repository. Instead of trying to manage a pile of paper receipts, opt for scanning and digitizing your expenses onto your device. There are a number of smart phone apps on the market that allow you to do this especially while on the go. Maintaining detailed records, including digitized receipts, is also beneficial come tax time especially for purposes of deductions.
Monitor Accounts Receivables
Think of cash flow as the lifeblood of your organization. Ultimately, it’s the sustenance that keeps you afloat by allowing you to cover your ongoing operational expenses. Late paying customers can quickly undermine that critical flow of revenue. That’s why it’s essential to stay on top of your business’ accounts receivables. Some simple ways to boost cash flow is to extend payment options, adjust payment terms, match receivables to payables, send out invoices immediately, investigate the feasibility of payment plans, and pick up the phone to contact clients that are behind in payments.
Get Professional Help
While it is tempting to go it alone when running your own business, it is important to know your limitations and outsource accordingly. Online resources can be more economical, but a lack of appropriate accounting expertise can result in unnecessary struggle and wasted time. CPA’s are phenomenal resources, but are often localized and relatively more expensive. As a result, the middle ground is often the ideal option for the small business owner as bookkeepers can typically deliver exactly what you need at a much-reduced cost.
Undertake Quarterly Reviews
One of the most valuable functions of bookkeeping is the business insight and intelligence that comes with analyzing data. Each quarter, it’s important to undertake an in-depth evaluation of your financial data to identify trends. Are certain clients always paying late? Are sales declining or growing? How about profit margin? How does your overall cost structure compare to previous years? Once you get a grasp of the big picture, take the appropriate actions to ensure your financial objectives are being met.