Once you've got your small business up and running, you'll have to handle many responsibilities that you may not have much experience with, including accounting. Accurately handling your finances is crucial to keeping your company afloat during its early stages of development.
Everything from your business' expenses to your owed debt are essential factors to manage as your company expands. Use these five small business bookkeeping tips to ensure your company is headed in the right direction.
1. Know which accounts to keep separate
There are a few things that you should be sure to keep separate from one another. For example, keep your burrowed capital separate and easily distinguishable from your accounts receivable payments. You can install a software that helps you keep careful track of what you've earned and what you owe.
It's also important to keep your personal and business expenses separate from one another. This will save you from having to pay back your company for personal debts or expenses, which can get become a headache if you haven't recorded each transaction to make sure you've paid everything back.
2. Handle checks with care
As a small business owner, you're probably writing a lot of checks. Don't let the process become too second nature. Sign your checks clearly to avoid any risk of forgery and, if you have partnered with another company, it's usually a good idea to have one of the partners co-sign them. Review canceled checks carefully before throwing them away or placing them in your file cabinet as well.
3. Hire a professional but stay involved
With so many responsibilities on your shoulders, it's usually best to hire a professional accountant to cover bookkeeping tasks. It may be tempting to save money and attempt taking on the role yourself, but it's often more cost-efficient in the long run if you call in a pro. This reduces the risk of financial errors that could have a large impact on your business and gives you time to see to the activities that you need to handle as the owner of your company.
However, while hiring an accountant will likely save you time and money, it's also important to stay involved in the bookkeeping process. Forbes suggested taking 15 minutes once a week to look over your expenses, debts and customer payments. This will allow you to understand the strengths and weaknesses of your businesses and will help you make important financial decisions when the time comes.
4. Make sure you're getting paid
It's common for small businesses to have a large number of receivables, but fail to enforce a regular payment schedule for clients. While you may have been successful at selling your products or services, this won't help your company grow until the money is in the bank. Requiring clients to pay for past purchases before they can buy anything else will show them that you're serious about payment dates.
5. Track your financial activities
You should be able to track your business' expenses to have a firm handle on all of your recent financial activities. Leave an audit trail by saving and organizing invoices, checks and other transaction receipts. Ideally, you should be able to look back at your small business' activity over the past year. If you can't, chances are keeping your finances in order will be challenging.
As there are several factors involved in small business bookkeeping, it's essential that you take the time to review your expenses and payments regularly. Use these bookkeeping tips to make sure that your company is on the right track to success.