Twelve Bookkeeping Tips for Small Businesses

For most small business owners, bookkeeping is one of the more tedious aspects of entrepreneurship. This task requires a lot of time, effort, and meticulousness to do properly. 

However, it’s important to note that accurate record-keeping plays a vital role in the success of an enterprise. When your books are precise and up to date, you have a clear picture of your venture’s financial position. 

If you haven’t started balancing your books yet, we’re here to help. We’ve created a guide on the art of good bookkeeping that will help you keep track of every transaction you make. 

In this blog, we’ll explore twelve bookkeeping tips for small businesses and discuss how they can help you avoid major tax problems. 

12 Bookkeeping Tips For Small Businesses

Are you having trouble maintaining good bookkeeping practices? Here are a few tips to help you out:

Keep Your Personal Finances Separate From Your Business

Mixing personal and business finances is one of the most common bookkeeping mistakes. It may not seem like a big deal initially, but this approach will make tracking your venture’s expenses difficult.

So, as a solution, you must open a separate business bank account as soon as you start your operations. This way, you’ll be able to keep track of all of your transactions, and your business can build its credit score. 

Establish An Efficient Bookkeeping System

Before starting your operations, you must establish an efficient bookkeeping system first. Creating your own system will allow you to have an audit trail you can use during a tax audit. 

Audit trails can help you retrace your steps if there are any inaccuracies in your reports. They’re also useful when the IRS questions any deductions you’ve claimed. It serves as proof that your filings are, in fact, true. 

If you prefer keeping physical records of your transactions, we recommend creating separate folders for your receipts and invoices. Keep extra copies of each document as backup in case you lose one. 

Lastly, you must create a system for tracking any cash payments you receive. Avoid spending them without depositing them in your business bank account. This could create a gap in your records, which will be harder to correct later. 

Create Regular Reports

Another excellent bookkeeping strategy you can use to keep track of your finances is regular reports. Regular reports will help you monitor your profits and expenses properly. 

Although most businesses use in-depth quarterly reports to keep a close eye on their cash flow, you can also use weekly summaries to check how much money comes in and out of your bank account weekly. 

By reviewing your books regularly, you can avoid bounced checks, overdue payments, and numbers that don’t add up. More importantly, you can use your reports to plan your budget ahead of time. 

Conduct Bank Reconciliations Regularly

Your corporate bank account is your primary source of information for your bookkeeping. You can use it to look for any gaps in your records by performing regular bank reconciliations.

Bank reconciliations are where you compare your records with your bank statements. It helps you ensure that all your transactions are accounted for, allowing you to avoid major mistakes that could affect your quarterly reports. 

Allocate A Budget For Taxes

Getting caught up in the joy of developing new products and marketing them to your customers is easy. But remember, a portion of your profit will go to your taxes by the end of the year. 

If you spend all your income on your business alone, you may not have enough to cover your tax liabilities.

With this in mind, it would be best to allocate at least 20% of your income to your quarterly estimated tax payments. This proactive approach will help you avoid financial strain and late penalties in the long run.

Monitor Your Accounts Receivable Closely

Your cash flow takes a hit whenever a customer fails to pay you on time. Because of this, you must keep a close eye on your accounts receivable. 

Check which receivables are due and contact any customers who are late on their payments as soon as possible. Another bookkeeping strategy you can use on your accounts receivable is sending your clients an invoice within 48 hours. 

Customers are most likely to pay your bill if the transaction is still fresh on their minds. Processing your invoice within 48 hours can speed up your collection and increase your cash flow. 

Designate Tasks

Designate certain bookkeeping tasks for your employees. Some areas of record-keeping are better off insourced, like issuing invoices and paying your bills. 

You can assign someone from your team to do these smaller tasks while you focus on producing and analyzing reports. 

Don’t Forget Your Deadlines

It’s very common for small business owners to start forgetting about their deadlines once their operations are in full swing. Unfortunately, these slip-ups can be expensive, especially if not addressed immediately. 

If you’re having trouble remembering your invoices with vendors or loan payments, start creating reminders for yourself. 

You can use your smartphone or email calendar. This way, you’ll get an automatic alert the day of. Alternatively, you can write it on a physical calendar and place it near your desk as a daily reminder. 

Reimburse Yourself

As an entrepreneur, there will be times when you have to use your own money to pay for certain expenses. When this happens, you must reimburse yourself properly. Write yourself a check and deposit it into your personal account. 

This approach will help you follow the first bookkeeping strategy of keeping your personal finances separate from your business. 

Make Time For Your Books

Although bookkeeping is not the most exciting task, you must prioritize it. One discrepancy in your account could cause significant damage to your business’s financial health. 

So, we recommend you make time for your books instead of ignoring them. You don’t have to check them every day, but you should do it at least once a month. Dedicating time to your small business’s bookkeeping will help keep your records organized and up to date.

Automate Your Processes

Once you start to get the hang of your bookkeeping, consider automating certain parts of your system. 

Most businesses these days use software like QuickBooks for record-keeping. However, there are other programs available in the market. All you have to do is find one that fits your needs.

We recommend consulting a professional accountant for help picking which application is best for your business. 

Get Help From A Professional

Finally, hiring a bookkeeper for your small business is one of the best strategies. As your business grows, you’ll need someone to help you bring your accounts to the highest level of accuracy and detail. 

A professional bookkeeper can do this, and they’ll even produce vital reports, like balance sheets, bank statements, and cash flow statements. More importantly, they can assist you in identifying and solving gaps that could cause problems to your finances in the future. 

A bookkeeper will do wonders for your daily operations and your business’s financial health.

Get Better Bookkeeping For Your Small Business

Whether you want to do the record-keeping yourself or want to hire a professional, these bookkeeping strategies will ensure your accounts are accurate and well-maintained.

If you’re having difficulty managing your finances, there’s no need to worry; NCH is here to assist you. 

NCH offers professional bookkeeping services to businesses of all sizes. Our team of specialists will help you create a system tailored to your specific needs and goals. 

We’ll ensure that your books are balanced and accurate so that you can focus on what matters most: growing your small business. 

Commit to better bookkeeping and contact NCH today. To learn more about our services, visit our website here or call us at 1-800-508-1729.

Disclaimer: The above material has been prepared for informational purposes only, containing opinions of the provider, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.