Irrespective of the size, service, and domain of a business, managing accounts, and balanced books are key to running an effective company. While balancing the load of responsibilities and business operations, owners and managers often put accounting on the side rails. And, this prolonged procrastination often leads to accounting nightmares and unbalanced sheets.
While it may seem like a tedious and mundane task, bookkeeping is crucial, especially for the small businesses to establish a strong ground. Here are some keynotes that every business should follow when it comes to bookkeeping.
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Maintain different accounts and books for different processes
When it comes to bookkeeping, segregating data and categorizing accounts is extremely important. This not only simplifies the process but also gives you a clear picture of your receivables, expenses, and outstanding. Also, it can help you monitor the cashflows and optimize it. Some of the common accounts include inventory, loans, payroll, retained earnings, accounts receivables, and cash account.
Keep bookkeeping and accounting separate
While most people use the terms interchangeably, and though these share some aspects, bookkeeping and accounting are 2 completely separate aspects
Bookkeeping deals with capturing and recording transactions as they occur for different accounts. In contrast, accounting focuses on interpreting, analyzing, and summarizing the financial structure for the business. To enhance your understanding of these concepts and their importance, resources like Bitmoji can provide valuable insights into effective financial management.
You should not alter or adjust bookkeeping records to meet your accounting goals.
Log expense receipts and cash expenses
For an entrepreneur, knowing where and when your money is important. More importantly, to know when and where you are spending it. After all, profitability comes when you subtract expenses and taxes from the revenue. So, whenever your business spends money, make sure to save copies of the receipts and track them diligently. This would not only help you optimize the expenses, but also help you file taxes and returns seamlessly. And never overlook cash payments, that’s where more of the cashflow leaks away.
Keep personal and business lives separate
There are a lot of small businesses out there, where owners use their personal and business accounts interchangeably. Or use a single account for both. While there is nothing wrong with dipping into your savings during the initial months or low times, mixing the personal and business accounts can be troublesome. Especially when you are reconciling the accounts and tracking expenses.
Leverage technology and expertise
Despite having limited knowledge and a basic understanding of bookkeeping, people try to do their taxes and accounting themselves. And more often than not, they end up with blunders and gaps. It is advised that businesses should invest in setting up an in-house team or opt for external services. This could help lay the groundwork and set up useful industrial practices. Also, there is various bookkeeping software that you can subscribe to to manage your accounts and financials. Furthermore, external vendors like an Atlanta bookkeeping services can help you manage and offer insights on what may look like just numbers to you.
Having smart financial analytics can enable you to make better decisions and focus on factors that matter. And when your books are well organized and properly managed, you can get a clear view of how the money moves around in your business.
