In business, as in life, the things that often matter most are the most difficult to do. That’s why so many people put off drawing up Wills and Living Trusts, and why so many small business owners relegate bookkeeping to the “tiresome and tedious column” of their to-do lists. The irony in both cases is that by taking care of the less desirable tasks we actually allow ourselves more freedom to experience fuller lives and more successful businesses. With the latter in mind here are 6 tips for successful small business bookkeeping.
1. Begin With a Realistic Budget: Although it’s important to be passionate and optimistic in running your business, these feelings can lead to unrealistic budgets based on inflated sales projections and underestimated costs. An effective budget needs projections that accurately factor in past performance along with the actual costs of doing business in order to create a realistic picture of potential growth and cash flow.
2. Know Your Bookkeeping Limitations: Although you may be adept at the day to day duties required to effectively run and grow your business, keeping accurate books may not be your strong suit. Although you may be adept at the day to day duties required to effectively run and grow your business, keeping accurate books may not be your strong suit. Look into procurement management and other book keeping solutions if you need more help.
Or you just may not have the time to effectively keep track of the bottom line. If this is the case don’t delay in hiring a competent and qualified bookkeeper. In the end you will have more freedom and a better financial picture to help you do what you do best.
3. Have a Backup Plan: If you’re like most businesses, you’ve saved time and money by keeping computerized financial records. However, in the event that your financials are rendered irretrievable due to a computer crash or other catastrophic event, keeping a paper trail or backing up your information daily to an online storage site is critical.
4. Minimize Tax Trouble: Although tax time is crunch time for any business, it can spell disaster for those guilty of haphazard bookkeeping. Failure to keep track of all expenditures, including all receipts for business related purchases no matter how petty they may seem at the time, could cost you a fortune in lost deductions. Not to mention the nightmare of being audited by the IRS and incurring large fines and potential legal action for having failed to keep accurate and up-to-date financial records.
5. Optimize Funding Opportunities: The ability to attract investors for a variety of reasons is fundamental to even the most solvent business. Being that investors will need accurate financial records to determine the risks and benefits of investing in your business, clear and accurate record keeping is a must, especially since not acquiring the necessary capital when you need it could mean a lost opportunity for growth or the inability to keep your business afloat during tough times.
6. Be Software Savvy: After all is said and done, a crucial factor in successful business bookkeeping is doing your homework to make sure the bookkeeping software you purchase serves your specific needs.
About the Author: Bryan Cochand is a freelance writer for Adobe. Adobe software, such as customer management software, and services, like web application development, revolutionize how the world engages with ideas and information; anytime, anywhere, and through any medium.