Top 10 Bookkeeping Tips For Small Businesses

Keeping up with accounting tasks can be difficult for any company or organization, but it is especially difficult when you run a small business and do your bookkeeping! To avoid chaos, implement a foolproof system that is appropriate for your company's size, revenue, and industry, while also embracing your heavy workload. You need to use a simple, impactful procedure that enables you to monitor and record all financial aspects of your business swiftly and easily. This way, when tax season arrives, all your expenditures, invoices, deposits, and other financial data will be tidily saved and accounted for. In this article, we'll go over ten great bookkeeping tips to help you get started on the road to bookkeeping bliss for your small business. Also Read: Advantages Of Incorporation For Business

1. Keep Your Personal and Business Finances Separate

It is critical to keep your finances separate from those of your company. Amalgamating accounts and expenses makes it more difficult for you or your accountant to organize and can raise red flags to auditors. Combining business and personal finances also makes it incredibly difficult to analyze the financial performance of your company because cash flow is obstructed by non-business expenses. Separating personal and business finances is more than just a bookkeeping tip; it is essentially a rule for small businesses to thrive.

2. Leverage The Potential of Cloud-Based Accounting Software

Utilizing cloud-based accounting software not only provides offsite data storage but also allows users to access your bookkeeping data from any device connected to the internet at any time, from any location. Accounting apps automate financial management, organization, and reporting, saving you time and money. Instead of carrying that receipt around until the ink fades, take a photo with your device and update it to the app.

3. Prepare For Data Recovery

This advice should be implemented in all your company's data. Plan to keep it safe if you can't afford to lose it! Data is the most valuable asset for all businesses. Making sure your financial records are backed up is critical to keeping your business running smoothly in the event of a natural disaster or cyberattack. If you lose your documents, you may be unable to claim certain important tax deductions.

4. Go Paperless

Advanced accounting software has transformed small business bookkeeping. Most platforms include everything that you need to maintain your company's accounting, including digitally organizing bookkeeping documents. These platforms include templates that enable you to easily enter data and track basic items like invoices, deposits, and check printing. By keeping your files digital, you not only save the environment but also minimize the chances of physical copies being destroyed.

5. Go Cashless

Accounting software can track many things for you automatically, but not cash. If you want to deduct large expenses during tax season, cash makes it even more difficult because there is often little to no record of these purchases. However, by using various digital payment methods, you can keep track of how much you spend, as well as when, where, and why. Electronic payment systems help to create an audit trail that you can refer to if you ever need to prove any tax write-offs.

6. Keep Employee Classifications Up to Date

If you have both employees and contractors on your payroll, you must ensure that they are correctly classified. The CRA enforces severe penalties for misclassification, even if done by mistake. Remember, it's much easier to get it right in the first place than it is to try and correct it later.

7. Strategize For Major Expenditures

If you fail to manage major expenses, you will certainly end up regretting it at some point. This is particularly the case if you work in a competitive industry and are unable to capitalize on a golden opportunity due to a lack of capital. However, saving necessitates a conservative approach to managing your day-to-day business requirements. Maintain a healthy rainy-day fund for future expenses such as updated machines and equipment or an upgrade to your company's computer networks by saving in tiny increments over a set period.

8. Put Aside an Adequate Amount for Your Year-End Taxes

The CRA is also interested in ensuring that you are complying with your tax obligations. If you don't save for taxes, you might have a nightmare come tax season. Assessing your tax returns from the preceding three to five years could provide at least a benchmark as to how much you should really be saving each month. If you don't have a lot of business experience to draw from, it's better to over-save than risk a tax penalty.

9. Examine Your Finances Frequently

This is one of the most important bookkeeping tips for a small business. Maintaining a consistent planner for reviewing your company's financials is the finest way to stay on top of your bookkeeping. Schedule one to two hours twice a month to go over your company's withdrawals, deposits, transactions, purchases, and other important items. Taking the time to review also allows you to check your accounts receivable to make sure your clients are paying their bills on time. If you notice any disparities or failures to pay, you can apply gentle pressure to bring your books up to date before tax season. Of course, as a business owner, you wear many hats and may not have time to dive deeply into your bookkeeping on a routine basis. If this is the case, it may be prudent to delegate this critical task to an expert.

10. Hire A Bookkeeping Professional

If you're having trouble keeping up with your accounting, or if you're not catching minor mistakes before they become major issues, it's time to contemplate hiring a professional. When using this strategy, make sure to use your bookkeeping service monthly rather than waiting until the close of the financial year. This way, you can make corrections before they cost you a lot of money. Also Read: Difference Between Sole Proprietorship and Corporation  Reach Out to CJ Chartered Professional Accountants For All Your Business Financial Requirements If you've already tried all these small business bookkeeping tips and still feel like you're in over your head with your company's finances, then you can always contact us. We can assist you by analyzing your current accounting processes, evaluating your main problems, and then planning and implementing a plan of action to optimize your bookkeeping strategies and produce transformative results. Our bookkeeping services can be as exhaustive or as modest as you require, and our experience with tax law goes a very long way toward making sure your finances are in adherence with the most recent CRA rules and regulations. Ready to book a free consultation to discuss your small business’s tax and accounting needs? Feel free to contact us by filling out the form or you can directly call us at +604-560-8020. You can also drop us a mail at reception@cjcpa.ca .