Businesses big or small rely on having access to timely and reliable financial information to be successful. Financial awareness empowers managers to make confident, strategic decisions that move their business closer to its goals. Accurate financial statements are a direct product of the accounting department - its staff and accounting software. For many small business owners, you are the accounting department.
Consider the following tips to save time and improve the way you do bookkeeping.
Tip #1 – Go Paperless
Clear your desk of unwanted paperwork and access your information anywhere with a cloud-based accounting software like Quickbooks Online. Scan receipts to your computer or upload them with your smartphone and attach them directly to transactions in Quickbooks Online. Choose paperless options with your bank and vendors to avoid pile ups.
Tip #2 – Keep Business and Personal Finances Separate
Save yourself the headache and never mix the two up. You will have a much better idea of how your business is performing by keeping personal finances out of it. If you do end up using your personal funds to pay for business expenses be sure to reimburse yourself.
Tip #3 – Avoid Paying Expenses with Cash
Cash can be difficult to keep track of especially if you don’t save your receipts. I recommend creating a Petty Cash account and managing it like you would a bank account. Store cash in a secure location like a lockbox and limit employee access. Keep a transaction log of all cash added to and taken from the lockbox. Reconcile the Petty Cash account monthly like you do your bank accounts by using the transaction log as a statement.
Tip #4 – Keep Your Records up to Date
It is very easy for small business owners to fall behind on their bookkeeping tasks. Time management is key. Keep a daily record of your finances. It is much easier to do a little each day than it is to tackle months of records in one dreadful sitting.
Tip #5 – Organize Your Bills
Late and unpaid bills can have a negative effect on your business reputation and credit. Develop a system for paying bills and stick to it. Consider using a bill management software like Bill.com to review, approve, and pay bills from your linked bank account. Bill.com also syncs to Quickbooks Online so there is no double entry.
Tip #6 – Set Aside Money for Taxes
As Ben once said, “In this world nothing can be said to be certain, except death and taxes.” Prepare yourself for the inevitable early. Keep a reserve for paying your yearly business income taxes in a separate bank account. Transfer money or make deposits to it monthly. Your balance may not be enough to cover all of your taxes when the time comes, but it will make tax-time less stressful.
Tip #7 – Follow a Budget and Save
Create a budget and follow it. Use data from prior years to estimate regular monthly expenses. Not all expenses can be predicted, so remember to save. If you are operating below budget, save the difference. Sometimes the importance of saving is not understood until something expensive breaks.
Tip #8 – Check Accounts Receivable Monthly
Improve cash flow by regularly monitoring who owes you money. Although you may not see a negative effect of accounts receivable on your financial statements, it’s hurting your bank account. Shorten payment terms to get paid faster and increase cash flow. Schedule time to contact customers with overdue invoices. Consider hiring an attorney if matters get out of hand.
Tip #9 – Review Your Finances Weekly
Set aside half an hour or so each week to analyze your finances. Start with the Profit and Loss Statement if you are not sure where to begin. This statement helps you answer questions like, “am I making money?” and “where am I losing money?”. Involve management and employees in your review where you see fit. Set goals and develop an action plan to improve performance.
Tip #10 – Find a Good Advisor
Every business owner needs a trusted advisor who will provide them with honest, expert advice. Typical business advisors include attorneys, accountants, and investment bankers. Your advisor should take the time to fully understand your business and clearly explain their strategy. Meet with your advisors semi-annually to ensure long-term success
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Need to hire a bookkeeper? Schedule a free consultation with a Quickbooks Online bookkeeper. Contact eBookkeeping Solutions today to receive a product recommendation that is specific to your business.