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Five Bookkeeping tips for small businesses

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Zara, Staff Writer

Friday, 21 May 2021

Bookkeeping for small businesses can feel complex. It’s not uncommon to feel completely overwhelmed when it comes to organizing your finances as a small business. There’s so much that you need to remember and no one wants to get it wrong and risk a fine or even legal action.

Ultimately, there aren’t many small business owners who would openly admit to enjoying their bookkeeping. Most entrepreneurs would much rather be selling or reaching out to new clients, rather than pouring over the figures.

However, it’s important to remember just how important bookkeeping is. Not only is it legally required to keep accurate accounts, but it also gives you a clear understanding of how your business is performing and what direction you are heading in. This can help you to make informed decisions on where to go next.

We’ve put together our top five tips for bookkeeping for small businesses, helping you to get your accounts in order and make filing your taxes a little bit easier when the time comes.  

1. Maintain daily records

There’s no hiding from the fact that bookkeeping isn’t the most exciting job. Unless you’re one of those people who are motivated by numbers, you’re unlikely to look forward to maintaining your accounts.

However, keeping daily records of your transactions is the best way to stay on top of your bookkeeping. If you leave it until the end of the month or even the quarter, you’re likely to have forgotten the details of some of your transactions.

The best way to ensure that your records are accurate is by carefully recording details of your income and expenditure every single day. Different people use different record-keeping systems, but as long as you have a system that works for you and you use it every day, your records will always be up to date and accurate.

2. Use digital Bookkeeping software

Rewind a decade and many small businesses were still completing their bookkeeping on paper. However, the world has moved on and digital bookkeeping software offers a simple and convenient way to manage your accounts.

There are many different types of bookkeeping software out there and there’s no right answer when it comes to which one you should choose. It’s all about finding the software that works best for your business. Some examples of popular accounting software include QuickBooks, Xero, and Sage.

Alternatively, some small businesses opt to use Microsoft Excel, creating their own spreadsheet, or using a downloaded template. Excel is a perfectly good option for keeping basic bookkeeping records, but it doesn’t have any of the most complex functionality such as linking to your bank account or automatically generating and sending invoices.  

3.Keep your bank accounts separate

As a Sole Proprietor, it can be hard to draw the line between your personal life and your business life. Many Sole Proprietors make the mistake of using one bank account for both personal and business transactions, meaning that income and outgoings can easily become mixed up or lost.

Although there is no legal requirement to have a separate business account as a Sole Proprietor, it is good practice. When you have a separate business account, it makes it easier to keep track of your transactions and to understand exactly how your business is performing. It’ll also make it easier when the time comes to file your taxes, as there will be fewer transactions to sort through.

4. Leave an audit trail

It’s important to ensure that you have a system in place which records your invoices and checks. You should be able to quickly and easily retrace your financial steps for the past 12 months. If you can’t do this, you aren’t leaving an effective audit trail.

You should keep your invoices and checks in numerical order and avoid skipping numbers. As mentioned in the previous section, it’s also a good idea to have separate bank accounts for personal and business funds. This will make it easier for you to see exactly how your business is performing.

5. Hire a Bookkeeper

It isn’t easy managing your bookkeeping as a small business. Sole Proprietors and small business owners are all too often trying to perform many different roles, from sales and customer service to IT and technical support. Bookkeeping is a task that many business owners just don’t have the time to dedicate to it.

Bookkeeping is also a specialist skill that requires technical knowledge. If numbers aren’t your specialty, you may find it challenging to perform your bookkeeping. That’s why bookkeepers exist – they are the experts at maintaining accurate financial records, making your life easy when it comes to completing your tax return.

If you’re thinking about hiring a Bookkeeper to help you to maintain your accounts, you can hire one on Bark.

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