The management and recording of financial documents and records can prove to be a challenge, especially if it is not done in an organized and efficient manner. When they are in paper form, there is a risk of losing them. Although with some cloud storage services, major security issues are at stake as bookkeeping records can fall prey to malicious viruses and dangerous hackers.
For effective business bookkeeping and maximum security, make sure that you use the following 9 tips and tricks.
1. Use Accounting/Bookkeeping Software
Although you can handle all of your documents in paper form, going paperless through cloud-based accounting software will enable you to manage and record your bookkeeping documents more efficiently.
The use of accounting/bookkeeping software enables users to handle all of the basics of bookkeeping, providing easy-to-use management tools that help in effective organization and improved security. Vital templates for check printing, deposit slips, business records, and invoices are part of the package that come with the software.
Another benefit that accounting software provides is the ease of accessibility. Once you have all of your important data on the software, you can access it from anywhere. This is because cloud-based software has applications that can be used on a smartphone, providing easy access to the records.
2. Maintain a Chart of Accounts
Small businesses have to maintain a ‘chart of accounts’ which is a list of accounts and bookkeeping records that help in categorizing all financial transactions that take place in your business. You may own a number of different titles, depending on the type of processes taking place in your business. There are 5 types of business accounts that are commonly found:
- Owners’ Equity
3. Practice Diligence with Tax Forms
If your small business has paid contractors and employees, it is important to stay attentive towards the tax forms that your business is preparing. An important factor that you have to consider for your small business is that you have to make sure that the employees working in your firm have the forms they need at the required time so that they do not have to face penalties or interest. Make sure that you set aside an ample amount of cash to cover all of the payroll taxes that will be applicable to the wages of your employees.
4. Do Not Combine Business and Personal Finances
One of the most important bookkeeping tips you must practice is ensuring that your personal and business transactions are not combined in any way. Your business is a viable entity and you have to treat it that way. Combining your personal finances with the expenditure of the business will make tracking in the organization much harder and it will be much more difficult to track records. Always ensure that you have a different checking account and separate credit cards for your small business and personal life to avoid confusion and ensure effective organization, saving you both time and money.
5. Outsource your Bookkeeping Needs
Business owners have an option of outsourcing their bookkeeping needs. This is especially helpful for small business owners who are running a business and playing the role of a bookkeeper themselves. This not only divides the tasks and responsibilities while lowering the burden, but also enables you to accommodate the time into something else that is beneficial to your business.
Outsourcing a bookkeeper is cost-effective and accurate. Secondly, instead of spending money on training a fresh bookkeeper, an experienced outsourced bookkeeper will provide you effective bookkeeping straight up.
6. Contact Professionals
When we consider bookkeeping for a small business, there is a big chance that things can go wrong. In certain situations, the smartest decision is to contact a professional. Bookkeeping and accounting experts will help you in setting up your bookkeeping system in a way that errors and mistakes will be minimized. At times, they might prove to be costly, but mistakes can be a major damage to the business so they are a wise investment.
6. Practice Daily and Weekly Reviews
For a small business, it is not sufficient to check your bookkeeping records on a monthly basis. In order to stay updated on any changes going on in your business, you have to keep a track of your records on a daily and weekly basis. Being updated on a regular basis will also enable you to keep track of any current invoices, see all expenses, and understand your cash flow.
8. Save as Much Paperwork as Possible
Paperwork has a higher chance of falling prey to disastrous events. This can affect a business very negatively because, in case you have to prove your tax filings, your business will not have any proof. Alongside, cloud-based software enables you to stay more organized and keep important bookkeeping documents safe.
9. Consider Profitable Deductions
Tax deductions can majorly benefit your small business. Effective business owners have a habit of maintaining proper bookkeeping records in order to ensure that you get the most out of all tax deductions, enabling you to invest that money somewhere else.