Running a small business means you’re taking on dozens of roles just to keep up with daily operations. Too often, things that aren’t immediately necessary get pushed to the side and forgotten, and this usually includes your bookkeeping. Then, when you need to track down financial information or you hit a slow period with your business, you don’t have the records on hand to get you through these obstacles. To help you run your business more effectively, our CPAs in Raleigh are sharing some tips to help you keep up with your bookkeeping.
Why Is Bookkeeping Important for a Small Business?
Before we delve into what you need to do, you need to know why it’s important that you do it. Keeping records of where your money is, where it’s from, and where it’s going offers you the following benefits:
- Proper forecasting; You can budget through the year and known when your slow periods and busy times are and plan in advance so you aren’t blindsided without enough cash to cover expenses.
- Analyze your financial statements; Knowing your cash flow, profit, and other information lets you see the financial state of your business;
- Keeping up with accounts; Are your clients paying on time or are outstanding invoices keeping you in the red? Are your bills paid on time? Knowing the status of your accounts payable and receivable improves your ability to budget.
- Reduces stress at tax time; Detailed record keeping through the year saves time during quarterly and yearly reporting and improves accuracy.
Maintaining Your Bookkeeping
Now that you’re inspired to save time, improve your financial state, and effectively plan for the future through your bookkeeping, let’s look at what you need to do to stick with it.
Log Your Receivables the Same Day
When you issue an invoice, make sure you record it in your bookkeeping software if not immediately, then the same day. This way, you can easily see who owes, how much they owe, and when you should follow up. Similarly, as soon as someone pays their invoice, mark it as paid that same day to prevent confusion and inadvertently trying to collect an invoice that’s already paid.
Log Your Expenses the Same Day
Just like keeping track of money owed and received, you need to have the same focus toward money going out. It’s too easy to see items on your bank statement and not know what they’re for or pay for something in cash and forget to log it. This could mean you’re coming up short on your cash flow at the end of the month and overpaying in taxes at the end of the year.
If saving receipts is a hassle, take a picture of your receipts and file the image in a folder, then log your expenses in your software at the end of the day with your receivables.
Separate Your Business and Personal Accounts
If you have a sole proprietorship or a limited liability corporation, it’s very easy to use business money for personal use and personal money for business use. For example, you’re at the grocery store for your usual groceries, and you remember your office is out of coffee and copy paper. No big deal, you’ll just pay for it all with your personal card, right? You may end up shorting your personal income, and over time this adds up to a lot of confusion come tax time.
Have a separate business account with its own debit card so if you do need to pick stuff up, you can easily do two separate transactions.
Make a Set Time Each Month to Run and Analyze Financial Statements
Your financial statements – cash flow, income, and balance sheets – all tell you where your business is financially, from knowing how much accessible cash you have, how profitable your business is, and what the total worth of your business is. When it comes to planning for the future, growing, and even taking out a line of credit or getting a loan, this is essential information to have. Learning how to create your financial statements and knowing what to look for can set you up for success in the future.
Outsourcing Bookkeeping for Your Small Business
If the idea of spending a block of time each day and a larger block at the end of the month to balance your books and analyze financials sounds like a nightmare, you may be better off outsourcing your financials to a professional accountant. They can keep your financial data organized, accurate, and up to date, as well as help you with financial statement generation and tax preparation. This can save you a lot of money, time, and stress, allowing you to focus on operating your business without worrying about not having time to balance your books.
Schedule a Consultation with a Small Business Accountant
We have a team of dedicated, experienced accountants and bookkeepers who can work on your financial details and records while you focus on growing your business. Serving Raleigh, Durham, Cary, Wake Forest, and Garner, along with the surrounding areas, we are happy to sit down with you and discuss your bookkeeping needs and how we can help. Reach out to us today at (919) 493-2603 or complete the form below to schedule a consultation.