Top 10 Bookkeeping and Accounting Tips for Small Business Owners

In order to run a business, you need to keep track of your money. There are many tips and tricks for small businesses out there (such as these), but until now, it has been difficult for entrepreneurs who don’t have accounting experience yet. This article will outline 10 easy ways for new business owners with little or no bookkeeping background to learn the ins and outs of keeping their finances in check.,

The “10 tips on business record keeping for entrepreneurs” is a blog post that goes over the top 10 bookkeeping and accounting tips for small business owners.

It’s vital for you to be active in the financial administration of your small company as a small business owner. Here are my top 10 bookkeeping and accounting ideas to help you keep things simple and understand how accounting data may help your organization succeed.

This article will teach you about bookkeeping.

1. Separate your business and personal funds.
2. Make an income for yourself.
3. Expenses should be reimbursed.
4. Keep track of your business miles and be reimbursed for it.
5. Keep track of your receipts.
6. Payroll may be outsourced.
7. Hiring a professional to set up your accounting software is a good idea.
8. Assign bookkeeping responsibilities.
9. Examine your financial statements.
10. Make a budget at least once a quarter.

Why Is Bookkeeping Necessary?

Bookkeeping is more than a dreaded chore. A reliable and accurate accounting system is essential. According to the United States Bureau of Labor Statistics (BLS), 20% of new enterprises fail during the first year, and 50% fail within five years. According to experts polled by Griffith University academics, the owner’s financial literacy, particularly their understanding of accounting software, is a critical component in predicting a small business’s longevity. You don’t have to conduct your own accounting, but you should know how to manage your company so that your bookkeeping is more effective and precise.

Good bookkeeping begins with the way a business is run.

The majority of my bookkeeping and accounting advice is focused on how you run your company rather than the bookkeeping system itself. Bank and credit card statements, not a stack of invoices and receipts, are the foundation of good accounting. A bookkeeper will keep track of all transactions in your bank and credit card accounts, then reconcile your books with your bank statements. This reconciliation ensures that all transactions have been recorded in the correct amount.

A accounting golden rule is that all company transactions should go via your business bank and credit card accounts, and no personal transactions should go through them.

Although this Golden Rule seems to be straightforward, many small company owners find it difficult to follow. Many of the following suggestions will assist you in adhering to this Golden Rule.

Top 10 Accounting and Bookkeeping Tips

1. Separate your business and personal finances.

This is a repeat of the preceding Golden Rule. Regrettably, it is one of the most often broken regulations. Even if you’re self-employed or a freelancer, I strongly advise you to have separate bank and credit card accounts for your company.

You may drastically minimize the number of transactions your bookkeeper has to sort and reconcile by removing any personal transactions from your business accounts. I’ve done accounting for numerous small firms where personal transactions accounted for more than 50% of the transactions in their “company” accounts. Sorting through your personal transactions takes time, money, and might result in errors.

2. Set a Salary for Yourself

C companies (C-corps) and S corporations (S-corps) must pay themselves a fair wage and process it through the payroll system in the same way that any other employee would. Self-employed owners, freelancers, and partners, on the other hand, should pay themselves a “salary,” even if it is legally an owner’s draw and not included in payroll.

Paying yourself a salary promotes the idea that your company is a distinct entity and eliminates the need to break the Golden Rule by having your company cover your personal costs. Instead of many transactions throughout the month when the company pays an expenditure on your behalf, have the company issue you one check each month that you deposit into a separate account for personal expenses.

3. Pay Yourself Back for Business Expenses

Despite your best efforts, you’ll have to pay for a corporate cost with personal finances at some point. Remember, according to the Golden Rule, these business costs must be recorded in your company’s bank account. To do so, request that the employer provide you a check to cover the expenditure you paid with your own money. This should be a separate cheque from your regular paycheck.

Self-reimbursement should follow the same guidelines as employee reimbursement. On a spreadsheet, record the costs, including the date, vendor, and purpose, as well as the receipts. After that, your company issues you a check for the precise amount. While this is a pain, it ensures that your bookkeeper deducts the charges since they were paid using a check drawn from the company account.

4. Keep track of your business mileage and be reimbursed for it.

Any business mileage driven in your own car may be deducted at a normal rate per mile (56 cents in 2021). Keep track of the date, mileage, and purpose of each work trip and submit it for reimbursement with your monthly expenditures, as described in tip three. QuickBooks Online can automatically monitor your distance using the GPS in your smartphone, which is much more convenient than manually doing so.

The company should not pay for any personal automobile expenditures, even gasoline that will be utilized only for work. You should pay for your gasoline and maintenance using the 56 cents per mile you got from the corporation.

5. Save all of your receipts

While receipts aren’t used by accounting systems to identify transactions, the IRS requires receipts for all tax deductions. Having a file folder for each vendor where you deposit paper receipts is an old-fashioned approach of preserving receipts. Scanning receipts and attaching an electronic copy of the receipt to the transaction inside your accounting software is a newer option. This is a useful feature that many accounting software packages provide for free.

6. Payroll outsourcing

According to a report conducted by Wasp Barcode Technologies, 50% of small firms have their payroll accounting outsourced. I strongly advise you to do the same. Payroll processing, withholding employee taxes, and completing payroll tax returns is a time-consuming procedure that may be readily outsourced for a low cost. Many payroll providers also interface with your accounting software, allowing you to instantly load the appropriate accounting data.

If you decide to outsource payroll, I suggest creating a second company checking account for payroll alone, so your payroll provider doesn’t have access to your main account. Furthermore, even if your main account is overdrawn, you may guarantee that money is in the payroll account when circumstances are tight. Payroll checks that bounce are one of the worst things that can happen to an employee’s morale.

7. Enlist the help of a professional to set up your accounting software.

There are many excellent options for small company accounting software, but effectively configuring accounting software is difficult. The more customized the software is to your company, the simpler and more advantageous it will be to utilize. Approximately 82 percent of the experts polled feel that a professional should set up a computer accounting system for a small organization.

Customize your chart of accounts, goods and services, customers, suppliers, and invoices with the help of a specialist. Make sure they teach you how to make any required adjustments to these listings. Once these lists are complete, simple tasks such as sending invoices and paying bills become much easier.

8. Assign bookkeeping responsibilities

The first seven bookkeeping and accounting principles apply to all small company owners, whether they perform their own bookkeeping or hire someone to do it for them. It’s now up to you to select how much of the job you’ll accomplish on your own. Here’s a summary of some of the most important accounting duties, along with my advice for a new small business:

Many accounting operations, such as producing invoices and paying payments, are essential to your organization. These are difficult to outsource. Other responsibilities, such as closing the books, reconciling accounts, and preparing financial statements, are beyond the scope of your routine company operations and should be delegated to a professional.

I propose that a new owner execute the weekly duties himself, at least at first, to familiarize himself with the program. If you’re new to QuickBooks Online, we offer some excellent free tutorials to help you get started. As your business expands, these weekly duties should be delegated to an office staff so that they may be completed on a daily basis.

9. Examine your financial statements

Don’t rely on your bookkeeper to Examine your financial statements. Their job is to input data into the software. It’s the manager’s job to examine the output of the accounting system to help manage the business. Small businesses often struggle with cash flow, and there are a few simple accounting reports that can help you:

• Accounts receivable (A/R) accounts receivable (A/R) accounts receivable (A/R) accounts rece This report details how much each client owes you, as well as whether the debt is current or past due. The report will offer you a decent notion of how much money you should collect in the near future, as addition to recommending when you should approach the consumer about payment.
• Accounts payable (A/P) that are past due: You can check how much money you owe each of your merchants and when it’s due in this section. This allows you to predict future cash flow requirements and forecast cash flow problems that need to be handled right now.
• The cash flow statement divides your cash flow into three categories: operating, investment, and financing. Negative operating cash flow is a potentially significant issue that must be handled.

Small company owners should know how to create and analyze financial statements using their computer accounting software, according to 82 percent of experts. It’s critical that you understand how to create these statements so that you can evaluate them at least once a week.

10. Make a budget at least once a quarter.

Now that you’ve reviewed your accounting reports, you should have good information to project your cash flow for the next few months. The first step in preparing a good budget is to forecast sales. Reviewing the sales shown on your profit and loss (P&L) report over the prior few months should provide some information on what sales should be next month. You may also want to consider what sales looked like for the same period last year to take into account any seasonality in your business.

The next step in a good budget is to examine the expenses on a recent P&L report. Try to predict what each major expense will be in your forecasted period based on your forecasted sales. Some questions to consider are:

• Which expenditures will rise or fall in response to a shift in sales? These are the most difficult to forecast of your variable costs. Direct labor and direct materials expenses, for example, may be best forecasted as a proportion of revenues.
• Which expenditures, regardless of sales, will remain the same? These fixed expenditures, such as monthly rent, are typically predictable.
• Are there any significant changes to my business operations? Make careful to account for any changes that may not have been reflected in previous financial statements. For example, if you recruit more office workers, your payroll costs will almost certainly rise.

Make careful to compare your actual outcomes to your cash flow forecasts. It may be tough to make accurate forecasts at first, but after a few cycles, you’ll see significant improvements. You’ll be able to rapidly detect and fix issues after you’ve mastered precise spending forecasts. Many company owners don’t realize they have an issue until they have a cash flow crisis since they don’t have a budget.

Conclusion

Small company owners cannot just outsource their accounting to avoid the headaches. Good bookkeeping and accounting are about how you manage and administer your firm, which is something only the owner can accomplish, as outlined in these 10 bookkeeping and accounting recommendations.

Accounting is a very important part of running a small business. It’s not always easy to keep up with all the accounting and bookkeeping, so here are some tips that can help you stay on top of your finances. Reference: accounting tips for students.

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