Bookkeeping for Small Business Owners

Keeping track of the financials and bookkeeping of your business can be a tedious job. The deadlines are often tight and intimidating. Independent bookkeepers have all the necessary techniques to deliver you these services, tailored to your specific situation.

Effective bookkeeping is essential to the long-term success of your company. Without it, you won’t have a clear understanding of where your finances are at all times, which can have dire consequences, ranging from late or missed payments to underpaying taxes.

But you don’t need to panic about managing the books for your small business. The following tips will help you get organized and get started:

Review your bank statements

It’s important to review your bank statements. It’s a good idea to do this on a monthly basis. By reviewing your bank statements, you can make sure that everything is balanced and there aren’t any suspicious charges.

Fix any errors as soon as possible

In bookkeeping, as in life, mistakes happen. If you’re doing your own bookkeeping, it’s important to fix errors promptly and make sure they don’t happen again.

The best way to avoid making mistakes is to stay on top of the bookkeeping process. But even if you’ve been diligent about keeping up with the books, it’s still possible that an error could slip through.

The key is to catch those mistakes early and fix them quickly. If you don’t catch a mistake until the end of the year, you’ll have to dig through all of your records to find where it happened and fix it, which can be time consuming and costly.

If you’re using accounting software like Xero for your bookkeeping, fixing common errors like overdrawn bank accounts or incorrect transactions is fairly simple. Here are some steps for how to do so:

Go into your account register in Xero and click on the date field of the transaction in question. It will display a window that allows you to change the date and description of the transaction — make any necessary corrections here.

Once changes are saved, create a journal entry to correct the balance of your account register.

Don’t forget about payroll

When doing your bookkeeping, don’t forget about payroll. Payroll can be an essential part of bookkeeping that can help you get a better understanding of your financial health.

Here are some ways that payroll software can help with bookkeeping:

Payroll is one of the biggest expenses for most businesses — especially small businesses — so it’s important to keep track of it when doing your bookkeeping. You don’t want to overspend on payroll expenses or pay too little and find yourself in trouble later.

Payroll expenses should be part of your budget, which means you need to include them in your bookkeeping. Having this information will allow you to create a realistic budget and make it easier to avoid overspending on payroll.

You can use payroll software to create accurate tax estimates, which is important for keeping track of your finances and meeting deadlines throughout the year. The more accurate information you have about taxes, the easier it will be to avoid paying too much or too little in taxes.

Knowing how much you spend on payroll each month will help you keep track of other expenses as well.

Make sure to keep all receipts

For every business expense you make, you should be able to confidently answer these questions:

Why did I make this purchase?

What purpose does it serve?

How does it help my business?

To answer these questions, always keep receipts for your business expenses. You can keep them in your wallet, purse or another safe place until you have time to file them away.

If you haven’t been keeping receipts, start now. But don’t worry about what happened before. Just start from today and keep every single receipt for all of your business expenses going forward.

Automate your bookkeeping

For many small business owners, bookkeeping is an afterthought — something to be dealt with at the end of the day or month.

But bookkeeping matters, because it’s how you keep track of your organization’s financial activity. It’s also how you tell whether your business is making money or losing it. The better job you do of keeping track of these things, the better off your organization will be.

Accounting software can help save time and sanity by automating most of the tasks involved in bookkeeping.

Consider hiring a professional

Although most small business owners like the idea of keeping their own books to save money, we’ve found that the time spent by a business owner in doing his or her own bookkeeping is rarely minimal. Most do-it-yourselfers find that it takes more time than they thought it would and produces results of questionable quality.

The best advice is to consider hiring a professional bookkeeper. Even if you do your own accounting at tax time, having someone else handle your bookkeeping will enable you to focus on running your business rather than spending hours entering transactions into an accounting system.

You’ll also need to choose an accounting method. For tax purposes, you need to keep track of all income and expenses either on a cash or accrual basis. With the cash method which we recommend as a profit first professional, record income when it’s received and expenses when they’re paid.

Takeaway

It’s not easy to be an entrepreneur, and it’s certainly not easy to be an entrepreneur that manages his or her own business finances. It can be a big job keeping up with the money side of things, especially if you are juggling everything else that’s important in your life.

The good news is, there are many ways to make the bookkeeping side of your business easier on yourself. We hope these 5 steps helped you. If you have further questions, you can always contact us at admin@profit1st.com.au or simply learn more by checking our website at www.profitfirsaccounting.com.au