10 Tips for Better Small Business Bookkeeping from our February 2019 Newsletter
Are you one of those small business owners who loves poring over spreadsheets? NO?! You are not alone. However, your business books are a scorecard of how well you are doing. You may not be a numbers person and so find this essential business task, if not a chore, then daunting. Other business owners may even enjoy going over their business finances but get caught up in the day-to-day workings of the business and don’t seem to have the time to ‘get around’ to them.
No matter how you feel about bookkeeping, it’s one of those tasks no business owner can avoid forever.
Ten tips to make small business bookkeeping easier:
- Separate business and personal finances
Co-mingling business expenses and personal income is a common mistake in small business bookkeeping and one that will cause huge headaches for your business in the future. Open a business bank account as soon as you begin the process of your start-up, and get a separate business credit card. This not only separates your accounts but also helps your business build its own credit rating.
- Automate wherever you can
Entering data into spreadsheets and reconciling numbers manually is old school. Use cloud-based bookkeeping software, and do your business banking online. That way, you can sync your bookkeeping software with your business bank account You will always have accurate up-to-the-minute records. Plus, with the cloud, your critical financial data is backed up safely off-site usually daily of not hourly.
- Ask a pro
Talk to your accountant to figure out if you can use off-the-shelf accounting software or if you would benefit from customizing to your business. Your accountant should be able to not only offer advice, but also set up the software for you and instruct how to use it.
- Perform regular financial checkups.
If you put off bookkeeping for too long, you end up with bounced checks, overdue invoices or figures that don’t add up. Go over your books weekly to make sure everything is top shape.
- Do a quarterly review
At the end of each quarter, take an in-depth look at your bookkeeping and accounting records. Look for trends, such as growing or declining sales, year-over-year revenues, or an increase in late-paying customers. Talk to your accountant. He or she can help you look at the big picture so you are better prepared for future capital needs such as buying new equipment or moving to a bigger location.
- Keep records of business expenses
Often tax codes change. Consult with your accountant for guidance; for example, on what kinds of expenses you can deduct each year. For anything you will be claiming, maintain detailed records; save time by scanning and digitizing receipts. You can also simplify expense tracking by always using a business credit card for business purchases.
- Monitor your employees’ hours with time tracking software
Cloud-based time tracking software allows employees to clock in and out on their smartphones, tablets or computers. It makes your life easier by automatically tracking overtime, PTO, etc. You can find time tracking software designed for just about any industry. Choose one that works with your bookkeeping software, and payroll will be a snap, too.
- Keep a close eye on accounts receivable
When customers don’t pay on time, your business cash flow can dry up fast. Pay attention to when your receivables are due and contact late-paying customers right away to nudge them along. Even if a customer is having financial problems, you may be able to set up a payment plan to get at least some of what you are owed.
- Stay on top of tax deadlines
To avoid getting caught short, plan ahead and set aside money for any anticipated tax bills. Pay on time so you don’t face fines. Keep track, with your accountant and with the Canadian Revenue Agency when your tax is due and Pay on time , no fines.
- Get help from an Accountant
Probably the most important on this list is worth repeating here. Get help from an accountant. A very important piece of advice, get an accountant that is not family or close to you. If you are not happy with your accountant, it will be easier to switch.
By Rieva Lezonsky, at Score modified for the Canadian market