Accounting Tips for Small Businesses to Keep the Books Balance
According to Wasp Barcode, around 21% of SMB owners admit not knowing enough about bookkeeping. If you belong to that 21%, you do not need to worry. We will give you a sneak peek at how you can keep your books balanced.
Why keeping your books balanced is essential?
Before jumping, let us understand the why. Accounting and bookkeeping are as crucial as the core operation of your company. Therefore maintaining balanced books becomes more important. Firstly balanced books lead to better and informed financial forecasting of a company. As a result, you can strategically draft your business plans. Secondly, you get access to your business’s accurate accounts and cash flow. Eventually, this helps in receiving paying timely. Thirdly, the tedious nature of bookkeeping increases the chance of higher human errors. So, reviewing your books at regular intervals helps in identifying that errors. Also, it saves organizations from bigger financial blunders. Therefore, we present the best accounting tips for SMB owners to maintain balance and clean books.
Tips to Balance your Books
- Separate Personal and Business Accounts
Often new SMB owner or entrepreneurs don’t distinguish their personal and business accounts. If you are one of them, you might overlook the critical business transactions. Maintaining separate personal and business accounts makes it easier to determine your regular spending. This way, keeping books balanced becomes easier. Also, keeping a separate credit card for your business expenses separates personal expenses.
- Monthly Bank Reconciliation
Bank reconciliation requires you to compare the cash balance of your bank statement to that of the company’s records. Firstly you need to identify and highlight the difference between both statements. Secondly, you must ensure that all interest income and bank deposits are added. Thirdly, subtract the bank fees & service charges. Lastly, it would help if you calculated & compare the balance of both bank & company records. Monthly reconciliation keeps your books clean and brings countless benefits. All these recorded expenses help in tax savings. Also, it is cost-efficient and guards the business against fraud.
- Maintaining Clean General Ledger
The general ledger is the core of your company’s financial records. These records constitute the central “books” of your system. Since every transaction flows through the general ledger, a problem with your general ledger throws off all your books.
Reviewing your general ledger system regularly allows you to hunt down discrepancies such as double billings or unrecorded payments. This way, you can fix the discrepancies in your books. As a result, your books are always accurate and balanced.
- Clean up your books at regular intervals
Cleaning up your books at regular intervals will help you identify and minimize errors in the beginning. Also, it deters employee fraud, embezzlement, theft & dishonest behavior against the business from both outside and inside. It will generate accurate amounts in account payable, account receivable, etc, which need to be considered before purchasing. Eventually, you make an effective decision as per the business’s financial health. With transparent cash flow, it allows you to track profit & company performance.
Additionally, it saves your business from accounting blackholes. Besides, it enhances your internal control as you are not required to rush to correct an incorrect accounting method or some mismatched balances.
- Record Cash Expenses
Being an SMB owner, you need to track all expenses to keep your books balanced. Among the hustle-bustle of the business world, you may forget to track your cash expenses. But it’s essential to deduct them from your income at the time of taxes as it leads to accurate and enhanced financial analysis. So, it would be best if you always asked your vendor for invoices.
- Create a cash flow statement
A cash flow statement gives the picture of your business’s cash inflow and outflow. Making a cash flow statement weekly or monthly can help you anticipate expenses and allocate income. Besides, it helps maintain optimum cash balance and even generate more cash. Moreover, it helps short-term planning for the business and leads to better cash flow management.
- Understand the difference between Invoices and Receipts
Invoices and receipts are often considered the same, and that’s where you go wrong. An invoice is a bill you send to the customer once they receive your service or goods. It consists detailed outline of all the deliverables. It helps you ensure that the payment is received timely. However, a receipt is a proof that a transaction occurred, and you provide the receipt to your customer once a transaction is complete. So to balance your books, you need to know the difference between the two.
- Leverage Technology
Balancing or keeping books accurate requires time and concentration. It leads to irregular checking of the books. Besides, the process is complex and overwhelming for anyone. That’s why the whole world is leveraging technology. Installing a cloud-based software or app relieves you from the monotonous and tedious bookkeeping and accounting job. Still, you must not forget to keep track of receipts.
Why wait for tax season when you can outsource your bookkeeping service with us. Get on a call with us and get your books cleaned as we offer accounting and bookkeeping services integrated with Quickbooks.