As a small business owner, the likelihood is that bookkeeping isn’t your favourite task. It is, however, extremely important in order to establish a profitable and financially healthy business that will be around for years to come. Compiling accurate financial data allows you to make informed decisions about the future of your business, whether that’s scaling up, cutting costs or identifying potential problems before they do any real damage.
Bookkeeping may feel like a headache sometimes, but we’ve got five simple tips to make it easier and help you to stay on top of your financial information.
1. Update Your Books Regularly
Do you look forward to balancing your books every week? Probably not. But it’s important to get into the habit of regularly updating your records. The little-and-often approach certainly beats dedicating your entire weekend to bookkeeping because you procrastinated for too long.
Furthermore, mistakes and problems compound over time; a small mistake in July could turn into a huge headache if you don’t notice it until December. Staying on top of your records allows you to solve problems quickly and efficiently, rather than trying to untangle a big web of errors.
Set aside a regular time slot each week for bookkeeping. If you know you’re likely to put it off, push it to the top of your to-do list and get it done first thing in the morning. Use this time to send invoices, look at your cash flow and track your costs. It’s much easier and more manageable this way.
2. Separate Your Personal and Business Bank Accounts
It’s always smart to separate personal and business affairs, and your bank account is no exception. If you use the same bank account for personal and business transactions, it becomes incredibly difficult to separate the two and this may lead to expensive mistakes on your tax return.
Furthermore, mixing your personal and business finances can make it difficult to keep track of your spending and calculate your profits accurately. It also appears unprofessional to credit lenders and potential investors, and thus may impede your growth.
The best way to keep your personal and business finances separate is to open a business bank account to keep your financial records as transparent as possible. This will save you from having to spend hours trying to remember whether a transaction was personal or business-related and thus greatly simplify your bookkeeping.
3. Stay Organised
In addition to keeping accurate records, it’s important to stay organised so that you can locate your files quickly and easily when necessary. This will save you a huge amount of time when reviewing your records and help you to avoid mistakes and lost data. If you keep your records electronically, use cloud based software or make sure that you perform regular backups to avoid losing documents.
4. Ask for Help
Business is not a DIY affair and if you’re struggling with your bookkeeping, it pays to ask for help sooner rather than later. For example, it can be difficult to know which categories to file certain costs under and what does and doesn’t count as a business cost. When doing your own bookkeeping, you’re also likely to make errors which lead to a lot of wasted time and even mistakes on your tax return. Needless to say, this is very bad news for your business as you could face penalties.
Outsourcing to a professional bookkeeper or accountant is the best way to save time and money for your business. It will not only ensure that your records are accurate, but also allow you to put your time to better use and focus on growing your business.
Bookkeeping is an important part of being a business owner, so don’t neglect your books or you’ll certainly pay for it later. Furthermore, it’s in your best interests to pay close attention to your books since this data empowers you to make smart financial decisions which will help your business to grow and thrive. If bookkeeping is causing you stress and anxiety, following the above advice will help you to simplify the process and get back to doing what you do best.