Do you feel that bookkeeping is not an important business activity? You’re probably wrong if you think so. What about money in the bank that could help you achieve your desired business goals? Now we’re talking.You don’t have to make bookkeeping more complicated than it needs to be. Adopting some basic, good bookkeeping habits can help you avoid costly errors and stay top of your books each month with little-to-no hassle.We have put together 5 bookkeeping tips for small business owners. Follow these good bookkeeping habits to get a bigger and better handle on your cash flows:1. Plan for Major Expenses
Is it likely that you will need a major computer upgrade or any equipment or machinery that needs to be replaced?
- You should be very honest and put such expenses that could be coming up in the next one to five years, on the calendar year in advance.
- Many small businesses are seasonal in nature, hence, it is essential for business owners to acknowledge the seasonal ups and downs, and how it will affect their ability to spend during those times.
It is important to track each and every expense, to keep your business’ cash flow going in a positive direction.
- Before you start paying, tracking, and accounting your expenses, you need to separate your personal and business expenses.
- Open a separate bank account for your business, so that you don’t have to waste hours examining your expenses at the end of the month. You will know the exact amount that your business has spent and the areas where the amount is spent.
Adopt a good bookkeeping habit to record deposits correctly, whether it’s a pocket notebook and pen, an excel spreadsheet or a proper financial software.
- Small business owners typically make a variety of deposits into their business account throughout the year, including, sales revenue, loans or cash infusion in the form of capital from personal savings.
- You’re keeping yourself open to paying taxes on the money that isn’t your income if you’re not accounting from where each of the deposits have come.
4. Set Aside Money for TaxesYou know, as a small business owner, you have to pay taxes to the government at certain deadlines that are already known to you.The income tax department imposes penalties and interest if the tax amount gets delayed or remains unpaid. Hence, a good bookkeeping habit is to systematically put money aside for taxes, to make sure that the money is there when you need it.5. Keep a close eye on your invoices
Many small business owners & entrepreneurs have to sell products on credit basis to their customers. You should have a specific person to track billings of your business and a proper process in place, if a bill goes unpaid.In case of late payments, you can do the following:
- Issuing a second invoice
- Making a phone call to remind the customer
- Levying penalties such as extra fees after a certain deadline
- Having policies for if a customer pays 30, 60 or 90 days late.