On average, small business owners spend 10 hours each week recording, organising, and processing financial transactions – everything from accounts receivable and payable, to employee payments, expense receipts and supplier invoices.
While the process may be time-consuming, effective bookkeeping is the foundation of sound financial management – which in turn, is the lifeblood of your business.
Feeling overwhelmed by mountains of paperwork and complex calculations? Here are four bookkeeping basics to help ensure a healthy financial future for your small business.
Track Your Expenses
Accurate and consistent expense tracking is crucial for claiming tax deductions and lowering your overall tax bill. Plus, analyzing expenses can offer crucial insights into spending patterns and the overall profitability of your small business.
Small business owners should consider using a mobile app for simple, consistent expense tracking. Options like Expensify and Receipt Bank help do away with manual data entry with automated functions, including:
- Receipt data capture via your smartphone’s camera (no need to hold onto paper receipts, which can get lost or misfiled);
- Synchronization with your phone’s GPS to track mileage of business travel; and
- Importing bank and credit card data, plus integration with accounting software.
Regular Invoicing and Filing
Efficient invoicing is about more than ensuring you get paid in a timely fashion. An invoice is an official record of the terms of each transaction and must be completed accurately to avoid errors in your bookkeeping process.
Here are a few tips for professional invoicing:
- Ensure each invoice includes all the important details: contact information, a unique tracking number, a detailed list of products or services rendered, and a breakdown of the total amount due;
- Provide an electronic receipt to reduce waste and create a “paper trail” if there’s ever a dispute; and
- Maintain an invoice-filing system that records when you sent the invoice, to whom, when payment was made, and any reminders sent out.
An online invoicing tool can streamline this aspect of your bookkeeping process and provide an efficient backup filing system.
Reconcile Your Accounts
Regular reconciliations of your business bank accounts and credit/debit cards are a must. It’s the only way to figure out the difference between the balance in your bookkeeping and your bank balance. It will also:
- help you to identify that all transactions have been recorded.
- ensure the bank account balances and credit card balances are correct on the financial statements.
- more likely that you will discover fraud.
Save Time With Accounting Software
By law, every business is required to keep organized and timely financial records. However, manually posting income and expenses to ledgers and journals is time consuming – not to mention stressful for the math-averse.
Shave some time (and stress) off your weekly bookkeeping with an all-in-one accounting software solution like Xero or QuickBooks Online.
Online bookkeeping offers numerous advantages, such as:
- Instant reports and real time insights on profits and loss, customer accounts, payroll – and your overall financial “big picture”;
- Simplified data entry so you can collate and print invoices, purchase orders, and payroll much faster than with manual methods; and
- Improved accuracy through automation (once data is entered, the software handles all subsequent calculations and processes – including invoicing).
When it comes to bookkeeping, vigilance is the key to mitigating risk and ensuring the long term profitability of your small business. Be sure to set aside time each day, week, and month to update and review your books to catch any red flags and ensure your finances are on track. If you cannot find the time, then hire a bookkeeper.