Bookkeeping is the daily recording of financial transactions and information relevant to a business. It ensures that individual financial transaction records are correct and up-to-date. Being as accurate as possible is vital to the process.
Bookkeeping for small businesses can be a difficult task and as your business grows, staying on top of your finances will become harder as a result. Our bookkeeping for dummies guide explains why bookkeeping is important and give tips on making your bookkeeping process more effective.
What do bookkeepers do?
Bookkeepers summarise and record financial transactions regularly into reports that reveal how the business is doing. They may also be responsible for broader responsibilities such as:
- Paying bills
- Tax return preparation
- Monitoring key performance indicators
Why is bookkeeping important?
- Budgets are essential in businesses since they serve as financial guidelines for success. Bookkeeping lets you manage both income and expenses.
- With bookkeeping, you have all your financial information ready for tax season. You won’t have to scramble for receipts and invoices if your records are organised correctly.
- Keeping financial records organised is important. You should be able to review your financial data at any moment. This will be beneficial when applying for grants, loans, or attracting investors.
- Poor financial records can prevent expansion from happening as quickly as you would want. It’s difficult to set yourself growth targets when you don’t have any exact figures or data to analyse. By keeping regular financial records, you can more accurately map out your business’s future.
Bookkeeping for dummies: Tips for bookkeepers
- Keep your personal and business finances separate– This separate account will make it easier for you and your bookkeeper to filter through your business’s transactions.
- Choose The Right Bookkeeping Software– Accounting software can automatically send invoices to clients on the right due date, manage your incoming and outgoing costs, and provide cash flow reports. There are many software options available. Compare the different options to find the one that’s best for you.
- Track Cash Payments– Cash received must be deposited into the business bank account before it can be spent. It’s tempting to purchase supplies, but this can easily mess up your bookkeeping system.
- Budget for Tax Payments- You can be ready for taxes if you keep track of your financial records properly. If you set aside a small amount of money each month to pay your taxes, you won’t have to cut back at the end of the year or take out a loan.
- Keep an Eye on Your Invoices- Late and unpaid bills can harm your business’s credit as well as its tax payments. Keep your bills organised and always pay them on time. Also keep a record of your payment receipts in case something goes wrong.
- Check-In Monthly On Your Accounts Receivable- Having a customer owing you money, particularly at the end of the year, is not the same as having that money in your business account. Keep a close eye on your accounts receivable so that you get all of the payments owed to you. Regularly running an accounts receivable report can help you remain on top of past due payments.