Every business, whether big or small, must have a bookkeeping system to succeed. The records help the owner track profits and losses, thus allowing for analysis of the financial health of the business.
Without a proper bookkeeping system, your business may fail, especially when you are unable to track and correctly budget, and plan the company’s finances. You will also not be able to tell if the company is moving towards its goal.
Here are 5 bookkeeping tips to help you stay organized and get work done.
Separation of Business and Personal Expenses
Most small businesses, especially when just starting out would use funds from the business owners or founder(s).
Although this may be understandable at the beginning, this practice should be stopped. Proper accounting and finance planning should be done from the beginning. This is because, by doing so, it will be difficult to tell whether the business is running on its own, and is sustainable or, it is being bailed out by the company’s owners.
Instead, focus only on an initial paid up capital, and use this starting fund to get the business up and running. If the business runs out of cash, the company can consider taking up loans, or raising additional capital from its owners. It is critical to avoid funding the business “as and when” required.
Your business or company should also have a separate corporate bank account setup. This allows for clear segregation of funds. After all the business, and its owners are considered a separate entity. Thereafter, any business related transactions, regardless of payments or sales should only be conducted through the company’s corporate bank account.
This helps to keep personal expenses distinct from business expenses. It also makes it easier for you whenever you want to track expenses as you won’t waste time going through bank records.
Other benefits of separating the accounts include protection in the event of paying taxes, selling the business or doing a valuation.
Organize & Proper Logging of Paperwork
Business transactions, sales, and cash are the lifeline of any business. Nonetheless, you must ensure to keep organized paperwork. This includes all transaction receipts, invoices, cheques, bills, employee payslips, etc.
Keeping these records in an orderly manner helps you easily manage or trail a transaction. You can do this by having different folders for different documents.
For instance, a folder for receipts, another for employee payslips, invoices, etc. In terms of bookkeeping, the more and better organized you are, the easier it is to retrieve back old information. You don’t want to be in the position when some time in the future, you need to check on past transactions and will have to fumble through your pile of unorganized materials.
In addition to physical copies, it is not uncommon for modern businesses to store their paperwork electronically. This de-clutters the office and makes it more organized, which would be easier to manage. It also makes it possible to access your business files remotely. One must still consider the security of storing such documents online; as documents can be hacked and stolen if not stored securely.
You must keep all your records for at least five years. Then perform a backup or upload to a cloud bases storage to ensure safety in the event of a system crash.
But whether you keep your paperwork in hard copy or soft copy, the most important thing is to make sure every transaction for your business has a paper trail.
Use Accounting Software to Automate Processes & Simplify Reporting
Using accounting software tools to automate your bookkeeping is great for helping you stay organized.
The software handles the bookkeeping for you while you focus on other important aspects of your business like getting new clients, making a profit, etc.
The software can be cloud-based or installed on your computer. Though cloud-based applications are on the rise. There are both free and paid tools for this. Some of the best bookkeeping software tools you can use are such as:
Wave Accounting is a free invoicing and accounting software for businesses and entrepreneurs.
The software is offered in several stand-alone products that focus on specific tasks. These tasks may be such as invoicing, accounting, mobile invoicing, receipts, et cetera.
Wave also offers payroll services and credit card processing.
Using Wave for your bookkeeping purposes, you can make direct data imports from the bank, track your invoices and expenses, customize your chart of accounts or even journal your transactions.
The software also provides you with custom tax calculations. They can, however, only enter the tax manually as the software does not have automatic tax calculation.
Also known as Intuit Quickbooks, this is a paid software that can also help you stay organized by handling all of your bookkeeping.
The software is offered as both a cloud-based and on-premises software solution for businesses.
Using the software, you can remotely access your files, organize your payroll, make electronic payments, or even do online banking and reconciliation from any location.
The software can also be integrated with Google Maps and Microsoft Outlook and Express. These can be utilized for marketing and handling emails, respectively.
The software can run on most popular operating systems and internet browsers, making it flexible enough for most businesses.
Xero is a paid cloud-based bookkeeping software useful for most business owners. It works best for small and medium-sized businesses.
Being cloud-based, the software makes it possible for remote access to your business files. Using a single unified ledger, team members from anywhere in the world can work on the same set of books.
This makes Xero more helpful and practical if you outsource skills far from your business location.
The software is also integrated securely with banks and financial institutions across the world, including PayPal and Stripe. This makes it possible to track or make electronic payments from the office or on-site with your clients.
The flexibility of Xero makes it our bookkeeping software of choice here at Leftright Corporate Pte .Ltd.
Chances are high that most businesses would choose for WaveApps as their accounting software of choice. As the main drawing factor would be that it is a decent accounting and bookkeeping software that is free.
However, aside from price, the capabilities and features of the application must be considered as well.
With that said, assuming price is not a factor – we personally recommend Xero. This is because, Xero has a dedicated support staff here locally in Singapore, and the features and capability of the cloud software is numerous. Beginners, or advanced users will both be assured that their needs can be met.
Your initial choice of software is important. If you decide to switch software in future, it is a real hassle. Trust us on this. Data migration from one software to another, depending on how far back the data is, is not cheap. You may even encounter some data loss if done wrongly.
So, if you can afford to, start off with the best, and you don’t need to be concerned with lack of features, or having to transfer data in future.
Understand the Reporting Requirements for your Company
To help you stay organized, you must understand the reporting requirements for your business. This will help you keep your bookkeeping updated and organized.
The reporting requirements of your business include taxes and other expenses necessary to keep the business running. The setting up of a Chart of Accounts is a fundamental step when doing your bookkeeping. This is a list used to define items on which your business has spent or received money or its equivalent.
The chart of accounts may be detailed with specific items or just have broad categories. The items listed on the chart may include advertising, marketing, sponsorships, etc.
You can handle some of your business requirements such as taxes on your own. But you will realize that some will require professional help. Understanding this requirement helps you to stay on top of things.
On the Chart of Accounts, ensure you specify whether each account is taxable or not. This will ensure your bookkeeping software correctly handles each account.
After this, ensure you always review your books to access whether the business is healthy or not. This should be as often as possible to allow you to take prompt action should you notice an issue.
Outsource your Bookkeeping
Most businesses when starting out would manage their own bookkeeping. However, when the number of transactions increase, which would require a greater time investment to conduct the bookkeeping, most businesses would eventually outsource their bookkeeping to professionals.
When running a business, bookkeeping can be tedious and time-consuming. By outsourcing you’d be able to focus other more important aspects of your business, such as making a profit and getting new clients.
A good accountant and bookkeeper, aside from sending you the reports, should also be able to explain your financials and make sure you understand the financial standing of your company.
We’re an expert when it comes to numbers, and tedious time consuming tasks. Every business and company is different, and we recognize the uniqueness. As such, prior to offering our bookkeeping service, we must understand the company and business.
Greater and clearer understanding of how you run your business, allows for concise, accurate and relevant data entry and reporting. If you require assistance, or have questions, please feel free to contact us.