Bookkeeping Tips for Small Businesses!
Stay updated with current accounting standards, business compliance, tax preparation tips, and latest news.
Bookkeeping Tips for Small Businesses!03 Apr, 2023
As a business owner, you have a lot to do. From managing daily business operations, client engagements, creating marketing strategies, and business networking to resource issues and more, every aspect needs your attention. With such diverse tasks, accounting and bookkeeping services become the least priority.For starters,if you need a better understanding of your business expenses, categorize them. There are many various classifications for expenses, however, the following are some of the most common ones:
Operating expenses: Rent, utilities, and wages.
Marketing and advertising expenses: Print ads, social media marketing, and website charges.
Sales-related costs: They include commissions, shipping charges, and credit card processing fees.
Organizing your spending into categories helps keep track of your spending and identify areas to save and reduce expenses. We have provided a few tips below to help you with the bookkeeping exercise but before that lets understand what are a bookkeeper's responsibilities.
What Does A Bookkeeper Do?
Bookkeeping involves gathering and organizing financial records and it is the bookkeeper's responsibility to compile, arrange, store and analyze business's financial data. A bookkeeper is responsible for the gathering:
- Invoices & Receipts
- Payroll statements Bill records
- Credit card and bank statements
- Tax returns and forms
The value of accounting and bookkeeping for small businesses!
Small business owners must maintain accurate records to track profit and loss in order to understand the financial status of their organization. Accurate books help ensure that adequate operational funds are available to keep the business afloat, identify and avoid unnecessary expenses and support in securing business finances when required.
Tips for Small Business Bookkeeping!
The key to successful small business bookkeeping is forming excellent habits early on. Without you needing to put in a lot of work, these bookkeeping methods can help you maintain your books accurately.
Plan for major expenses
While estimating recurring monthly expenses is easy, those are not the only expenses when it comes to ensuring adequate funds availability / projection for your business. Be honest about the big ad hoc expenses anticipated in the next one to five years - upgrade of office equipment, major upgrades, etc. Planning to ensure adequate funds availability during seasonal ups and downs in business also helps.
Whether you choose manual or automated bookkeeping, record each business transaction. Having a separate business bank account helps ease out the efforts to identify and separate business transactions from personal expenses. Record each transaction relating to business spending as though you are about to undergo an audit.
Besides, tracking expenses diligently can help you benefit from tax write-offs that could have been missed otherwise. Similarly, keep a track of the deposits into your business bank account and categorize them else you may end up paying tax on money that is not an income.
Categorize but don't over categorize
It's simple to over-granulate charges when it comes to expenses. For instance, you could have four or five sub-categories for vehicle expenses - parking, fuel, repairs, insurance, etc. However, you need to decide if you need separate expense heads or can you group them into a single category.
Managing your cost accounts requires a balance between gathering sufficient data and defending the efforts required to log them. Because every organization is unique, you should always take into account why you have a separate account for a given spending.
Set aside money for Taxes
Plan for tax payments ahead of time to ease the financial burden in the given month. Unpaid taxes can incur penalties and interests from CRA and it helps to keep some money aside regularly.
Keep your Invoices in check
Unpaid and delayed invoice payments can hurt your cash flow and so it is advised to either plan regular tracking of your billing. You may want to add a penalty or an interest on the delayed payment and create a process to handle and follow-up for unpaid / delayed invoices - reminder e-mails, phone calls, etc.
Consider investing in an online bookkeeping and accounting service or accounting software product which can help automate the invoice generation and follow-up process.
Keep up with the changing tax rules
While being in control of business operations, cash flow management, quality, etc are integral to a small business owner, you also need to be aware of the changes in the tax rules to plan for and take advantage of benefits introduced by the provincial government from time to time.
Unless you really enjoy working with numbers, bookkeeping is probably not your favorite task. However, efficient online bookkeeping and accounting services are crucial for the sustainability and success of a business.
As a small business owner, you can choose whether you want to handle the books yourself or hire a professional to do it for you. You may not need to employ a full time accountant or bookkeeper for a small business which has a few transactions each month. However, you will need a professional as your company expands.
You can always ask for our assistance if this is too much! We are an accounting firm Surrey that can help you with a consultation call whenever needed.