Business owners need to handle multiple aspects of their venture for it to succeed. Every element is critical to its success, but a few require more attention than others.
One such aspect is your finances. Sorting your books will give you a clear idea of your company’s financial health. It also prevents your tax filing from becoming too complicated. Additionally, a poorly organized financial statement will cost you money and risk government litigation.
However, many business owners will claim that bookkeeping is not always easy. For example, employees can misplace documents or recklessly write or type numbers.
This article will go through some common bookkeeping problems and pointers to help you breeze through them. This way, you can effectively balance your company’s books by the end of this piece.
Table of Contents
Defining Bookkeeping
Bookkeeping is the process of detailing and organizing your financial transactions. Doing so will give the business owner a clear idea of its current financial situation. It also helps the company identify the aspects where it performed and where it needs intervention.
Learning how to manage your cashflow properly is vital because it can save you time and money when figuring out your finances. It also keeps your business safe when auditors come over to inspect. When auditors find anything questionable, you can face litigation or pay considerable fines.
Common Bookkeeping Issues
Bookkeeping is an important activity, but its complicated nature makes it easy to mess up. In fact, most businesses that get in hot water with auditors simply mishandle their books.
One of the most common errors is improper recording transactions. Another common headache, especially during tax season, is not placing expenses under their correct categories and not sorting out sales tax. Other company book problems include terrible petty cash management, not having enough backups, and incorrectly classifying employees and individual contractors.
Pointers to Help You Bookkeep Like A Pro
Prevention is better than cure, so it is critical to approach your bookkeeping differently. This section will provide tips to help you avoid accounting-related headaches in the future.
• Keep business and personal accounts separate
It can be tempting to fix your personal taxes alongside your business’s. Every asset in the company is yours, anyway, so why should you not process both in one book?
Every accountant worth their salt knows that intermingling personal and business finances will cause a huge pain down the road. This is especially true when auditors request books from the first year. Make it a point early on to handle your business’s books separate from your own.
• Create regular reports
It’s good practice to write and present financial reports regularly. They document your company’s financial situation at multiple points of the year. It’s up to you how frequently you would want to hold these reports, but it is recommended to have these done quarterly.
These reports give you a solid paper trail that you can use to track your business’ financial health. Additionally, use these reports to give your team ideas on improving processes and promoting a better cash flow.
• Take note of tax deadlines
If you don’t want an auditor constantly tailing your company, it’s essential to always keep your taxes in check. Always take note of when your company is required to pay its dues to the government and make sure to meet those deadlines. If you are struggling to keep up with your taxes, you can hire professionals to do the heavy calculations for you.
• Use bookkeeping technology
Bookkeeping used to be such an intense activity that required lugging heavy books around. However, innovations have completely transformed how accounting is done. Nowadays, many firms look to cloud accounting to process and sort vast amounts of data.
Take advantage of the available tech and utilize business tools that make the process easier. Using cloud accounting software can help prevent bookkeeping hiccups that may cost you money down the road.
• Monitor your accounts receivable
Due to the global pandemic, some clients haven’t been able to pay their service providers. However, delaying the turnover of cash will only hurt your books.
Approach and gently remind them of the money they’re due. If their finances don’t allow them to pay the full amount immediately, you can compromise on a payment plan. Doing so will help you get cash flowing into your company.
• Learn your books
It sounds obvious, but plenty of business owners do not know the ins and outs of their books. This leaves them stupefied when auditors find discrepancies in their accounts as they have no idea where their bookkeeping efforts went wrong.
Learn everything there is to know about your accounts. If you do not have an accounting background, it still pays to learn the basics and understand how to read your books. Knowing the financial health of your company helps you make informed decisions. Of course, you can always turn to a professional if worse comes to worst. Just make sure that consulting with one is within your budget.
• Balance Your Books and Watch Your Business Thrive
Proper bookkeeping is a business owner’s best friend. A comprehensive account of your company’s financial health will help you make informed decisions. This can easily help your business grow. Not to mention, it will help you avoid costly fines and possible litigation.
If you need more help with running your books, do not hesitate to contact expert accountants to guide you along the way.
