Bookkeeping is how a company tracks income and expenditures. The financial health of any business relies in part on accurate bookkeeping to provide information for operational, investment and financing decisions. To have good information to basis company decisions on, it is crucial to maintain proper records of all transactions, right down to the penny.
In addition to providing information to business owners, partners, and investors, this information is used to comply with regulatory and tax requirements. Failure to keep completely accurate books may cause inaccurate tax filings and regulatory failures, which can result in serious financial penalties or fraud charges.
Bookkeeping takes time and expertise, and many small businesses struggle with allocating resources for it. Some business owners choose to do it themselves rather than hire a bookkeeper. But running a business and maintaining its books can be overwhelming. Business owners who try it often put off recording transactions and rush to do them at the last minute, which can cause errors that cost the company money.
In this article, we will share some bookkeeping hacks to help you stay efficient and organized.
1. Record all Transactions
For accurate bookkeeping, it’s imperative that you start by making a record of all money that comes into or flows out of the business. If transactions are missed, your profit and loss statements will be inaccurate, and you’ll end up making business decisions based on faulty information.
Most of the time it’s the small stuff that falls through the cracks, but that small stuff can add up. Here are a few tips for making sure you capture all transactions:
Ask for receipts – Lunch, gas, parking garages – it’s all small stuff, but it adds up – make sure you get a receipt.
Use a credit or debit card - Credit card companies send very clear statements, making it easy to track expenses. Even if you lose a receipt, the credit card statement provides an alternate record of the transaction.
Keep a notebook – If you grab lunch from a hot dog vendor, you may not get a receipt. Those expenditures still need to go into the books. Keep a dedicated notebook with you at all times to record these expenses.
2. Create an Organizational System
If you find yourself hunting through your pockets, wallet, or piles of paper for receipts and other documents when it’s time to update your records, you may end up with gaps in your accounting.
To avoid scrambling, you need an efficient organizational system. Scanning receipts and storing them digitally is one good system. But if your days are already packed, it may be easier to have an organized place to put them. Three-ring binders make great, flexible storage systems. Plus, you can address two important needs by creating branded business binders for use as an attractive storage system that shows office visitors you have it all together.
Here are some tips for creating a binder that does both:
Use index tabs to organize receipts and other documents by income and expense accounts. Use customized index tabs to create a branded look. Or use mylar-covered tabs, which are available in multiple colors to color-code your organizational system. They also work well in file folders. Here you can see the varieties of index tabs available.
Use pocket inserts – Pocket inserts can be added between tabs to hold documents, so you don’t have to take the time to punch holes in them.
Add pockets to the binders – they are good for storing miscellaneous documents. And, for marketing presentations, they’re a great place for a brochure or other marketing piece you don’t want to punch holes in. Adding pockets when your binders are made looks much better than adding adhesive pockets later. You can also add pockets for business cards, labels on the spine, and media such as CDs, DVDs, and flash drives.
3. Keep Business and Personal Finances Separate
A 2021 survey showed that up to 27 percent of small business owners use one account for both personal and business finances.
Intermingling these accounts can make business accounting a nightmare. To make it much easier to manage your books, open a separate business account. Using separate debit or credit cards to pay personal and business expenses makes it much easier to track business transactions, keep accurate books and get a quick overview of income, expenditure, and overall performance. And it makes it easy to distinguish between personal and business expenses when filing returns, so you don’t have to spend hours scrolling through statements.
Separate accounts can also help you manage cash flow. If accounts are combined, it’s easy to overspend on personal items and come up short when you need to meet your company’s financial obligations. Conversely, personal loans to the company should be recorded accurately as such in the company’s books.
4. Take Advantage of Technology
There is a wide array of business accounting software available to automate some of the repetitive, time-consuming processes involved in business bookkeeping. They can help with tasks such income and expenditure tracking, payroll, invoicing, inventory management, and time tracking.
Not only do they save time by eliminating manual processes, but you may also save money, and you’ll get your information centralized for quick and easy access. Plus, most new applications are cloud based, so they allow for remote input and access to reports. Automation also reduces human errors that can cause bookkeeping inaccuracy.
To pick the best software for your business, analyze the processes you need help with, make a list of available software that performs those functions, and read customer reviews. Some offer free trials so you can test them out before committing.
5. Manage Your Time
Some basic time management tactics can support your financial management.
Keep track of your time. Allocating a specific amount of time each day or each week to update your transactions and blocking that time off on your calendar will help you stay on top of bookkeeping.
Be proactive. Rather than waiting for a supplier to ask for a purchase order, send it upon ordering.
Organize your workspace. In addition to organizing your receipts, organizing the rest of your office will help you avoid time-wasting hunts for important slips of paper.
Keeping up with updating records will keep you from having to pull a frantic all-nighter. And they will increase the accuracy of your financial records, so you have the most accurate information on which to base business decisions.
Making sure you get the documents you need, creating an organizational system for them, managing your own time, and getting support from specialized software will all help reduce the burden of bookkeeping.
If it’s still overwhelming, you might seek professional help from a freelance consultant or CPAs to bring your books to date and help with tasks like filing taxes.