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In business there is one task that many small business owners despise. Bookkeeping is a critical business practice that should be properly kept and planned in order for a business to survive. Without proper bookkeeping, you may be setting yourself up for failure and not even know it. Without proper records you cannot hope to apply for an accounts receivable loan, finance an expansion or even file your business taxes correctly. For those who dread taking on the task, here are a few tips to setting up your bookkeeping so they are both accurate and legal.
1.Software and Ledgers
When bookkeeping is concerned, you can never be too careful. Experts suggest keeping multiple copies of your finances. If you are just starting out, try keeping one written ledger and one copy in your accounting software. Most accounting software suites can be confusing at first and you will want the chance to compare it with your hard copy to assure it is working properly. After you are confident that your software is accurate, you can switch to software only bookkeeping in just a few months.
2.Debits and Credits
In any financial record keeping, there are primarily 2 types of transactions; credits and debits. These are also known as expenses and revenues. When balancing your company’s books, you ideally want your credits exceeding your debits. If there is even the slightest miscalculation or improperly placed decimal point, your entire balance can be shifted. It is suggested you take the time to balance your books after each transaction to assure accuracy, the same way you balance your checkbook.
3.Accounts Receivable and Payable
Not every business is cash only. If you provide goods or services to customers, you will want to keep track of accounts receivable and payable. These are outstanding bills that need to be paid to you or paid by you. It is required by law that you keep track of your accounts receivable and you will want to be sure an invoice wasn’t misplaced.
If you house inventory, it is important to properly track all aspects of each product. You will need to record purchase dates, serial numbers or stock numbers, how much you paid, the price you sold them for and when you sold them. This is not only helpful with accounting and tracking your profits, but will also help in cases where your office was broken into or goods are damaged by fire, flood, or other disasters. Your insurance company will appreciate the detailed list.
Sometimes you just can’t go wrong with hiring a professional. While larger corporations have accountants on staff, smaller business owners will often hire a firm to help setup their books for the first year and get off to the right start. Others may choose to have the firm come in once a week or once a month and balance the books to assure accuracy. This will also be beneficial at the end of the year when it is time to file your income tax. Filing with a firm that already knows your bookkeeping will assure you get the proper refunds and tax breaks and ultimately save you money.
Accurate bookkeeping is not difficult once you understand the steps and time required. As long as you follow the proper tips, take the time to record your transactions, and keep hard copies of all of your records, you will find it easier to be accurate. If you are still unsure and are more comfortable having someone else do it, hire a professional to get off on the right foot.