For many start-up business owners, bookkeeping and managing finances are among the scariest aspects of running a business. If you don’t take steps to keep your finances in order, you may find yourself in financial trouble. The good news is financial management skills can be acquired through continuous learning, even if you know nothing about finances. Here are a few tips to help you ace your company’s bookkeeping:
Keep correct records
If you just started a small business, you need to learn record-keeping and accounting. Most of your daily expenditures can be tracked by credit cards, online transactions, and bank records. You can also invest in accounting software such as www.zarmoney.com that will make it easier for you to do your bookkeeping. Your accounting team will thank you when the time comes to file the taxes.
Separate your personal bank account from your business
Mixing business and personal finances can result in a disaster. The first step you should take when starting a company is opening a business bank account. Separating professional and personal finances makes it easy to keep records and track business expenditures. It also comes in handy when filing your taxes. While you may not be legally required to open a business bank account; especially if you own a sole proprietorship company, it’s essential to do so. Before opening a business bank account, register your business name with your state.
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Keep your receipts organized
Most business owners think it’s unnecessary to keep receipts, especially when all transactions are done electronically. Receipts and sales slips have important expense details and dates that may be useful in future. Don’t just put your receipts in a drawer- organize them according to a particular category. When the time to file your taxes comes, your receipts will be useful in making the necessary accurate deductions. Keeping receipts also helps you understand where most of the company money goes and look for ways to reduce costs.
Learn accurate invoicing
For most new businesses, invoicing is a foreign concept. It’s essential to keep a record of all details about everyday transactions. Accurate invoicing also encourages and reminds your customers to make timely payments for delivered services and products. Using invoice templates for small businesses are a great way to get started. If you learn the art of correct invoicing, you can keep your finances organized and understand which clients fail to meet payment deadlines. Never create several versions of the same invoice or add more expenses on an already finalized invoice. Changing an already completed invoice will not only confuse you and the accounting team, but it also makes you lose customer trust. This can also create chaos in the accounts receivable process making it inefficient.
Get receipts for any donations
If you are a frequent contributor to nonprofits and charity organizations without asking for receipts, it’s time to change that habit. Money donated to charity could earn you tax benefits. However, you will need the receipts to deduct the amount when filing taxes.
Create profit and loss statements
Having P&L statements will give you an idea of the financial well-being of your business. The report will summarize costs, revenues, and expenses incurred by the firm during specific dates. It can disclose relevant information about the company’s profit generation abilities, commonly known as financial results, income statement, or an operations statement. However, you need to compile the below information before coming up with a P&L statement:
Records of every purchase done using the business checking account and credit cards.
All your company’s income sources, including checks, cash, and credit card payments done to your company.
All petty cash transactions and any other activities- must be accompanied by receipts.
All discounts returns, and price reductions offered to your customers.
As a small business owner, bookkeeping is one of the most critical aspects of your business. With sound financial records, you can easily manage deposits, debts, and services or products offered on credit. Without the proper bookkeeping skills, you might find your company incurring unnecessary losses, thus leading to bankruptcy. Keeping track of all your company’s expenses is the best way to minimize unnecessary costs, thus lowering the cost of running your business.