As early as its growing years, business start-ups should make time and effort in keeping records of every business transaction including accounts payables and receivables. This might be cumbersome for some business owners, especially those who handle the accounting themselves, but it will eventually yield favourable results for their business, especially come tax time and auditing season.
By maintaining a good financial record, you can easily monitor where your expenses go and which business you owe money to. It also helps you make better decisions, for instance when deciding to expand or offer more products.
As a business owner, what are the basic but important things in bookkeeping that you need to know? We list down five essential tips for you to consider:
Record daily expenses
Never forget to log every expense incurred. Be specific and record all the details including the purpose of the expense as well as the invoice and cheque numbers. Do not leave anything out. Accuracy is always important in record keeping and particularly useful come auditing time.
It’s also important to record expenses taken from petty cash. Ask for a receipt every time your business pay in cash and keep them somewhere safe and accessible.
Organize your financial records
Keeping records is not just about saving the receipts and invoices. It is also about organizing them properly so that you’ll know where to look for them when you do financial reports. Separate files for income and payroll, accounts payables, loans, and daily operational expenses. Keep them in alphabetical or numerical order. Imagine the amount of time you can save by just keeping your files in order.
In addition, avoid including personal expenses in your business account as this can lead to misappropriation of funds.
Update Receivables on Time
According to accounting experts, this is the most common mistake that small business owners make.
Reconcile your accounts receivables with their corresponding invoices as soon as you receive payment. This way you can track which receivables are paid and the ones that are not. Check for any inconsistencies as well to ensure there are no errors in them.
Keep the receipts of every business purchase
When you spend on things for your business such as office supplies and equipment or gas for the company car, remember to always save the receipts. Keep them in an envelope and bring it with you in your bag or car for easy safekeeping. This will come in handy especially when you’re out on the field or on a business trip. File them once a month as soon as you have collected enough.
Sometimes receipts can become unreadable over time so make sure you photocopy them or save digital copies before filing.
Use a bookkeeping software
For easier and better management of your financial records, you can use a bookkeeping software such as Xilch as an alternative. A cloud-based accounting software helps you monitor expenses, process payments and invoices, generate financial reports, backup your files, and more. Xilch’s bookkeeping service, in particular, comes with certified tax agents to help you manage your finances.
Small and medium enterprises (SMEs) don’t need to be financial experts when it comes to bookkeeping. As long as they are proactive with their finances and possess practical knowledge in managing them, they will be able to handle their business better.