Bookkeeping—the dreaded task of many entrepreneurs. If the thought of managing your business’s books overwhelms you, then this blog is for you! Though it may seem intimidating, managing your company’s daily financial transactions is an essential part of your business. Learning the basics of bookkeeping and staying on top of your business finances will help you remain organized while building a strong foundation for success. Plus, familiarizing yourself with your financial statements and developing a clear understanding of the inner workings of your company will make you better equipped to grow.
Why Is Bookkeeping Important?
Learning how to do basic bookkeeping is important to help you:
- Maximize tax deductions
- Accurately measure the performance of your business
- Make informed financial decisions
- Effectively manage cash flow
- Identify and prevent errors
- Save time
- Be prepared in the event your business gets audited.
Basic Bookkeeping Tips
Although it may seem daunting, it is entirely possible to manage your own books with just a little bit of basic know-how. Here are some simple tips to get you started:
Keep Business and Personal Finances Separate
Be sure to draw clear lines between your personal and business finances. You should have a separate bank account and credit card for your company. Some of the main reasons you want to keep things separate are to:
- Ensure that your personal assets are protected in the event that there are issues or debts related to your business.
- Help your business build a credit history.
- Save yourself the time and headache of sifting through stacks of transactions to identify which ones are business related.
- Make it easier to maximize deductions at tax time.
Get the Right Bookkeeping Software for Your Needs
Instead of using spreadsheets, manually sending invoices, and keeping shoeboxes full of receipts, get yourself set up with bookkeeping software. Do your research and choose one that meets your specific needs. You can save time and aggravation with a software solution that enables you to easily scan and keep track of receipts and expenses, and one that links with your business bank accounts and credit cards. Consider the size of your company and if you would benefit from features such as payroll, inventory tracking, recurring invoices, and mileage tracking. A few noteworthy bookkeeping software options to look into are QuickBooks, FreshBooks, Xero, Zoho Books, Wave, and Sage. Each comes with different key features and integrations, so make sure to do your homework.
Do Your Bookkeeping Daily
Never let bookkeeping tasks pile up. You should set aside a short amount of time each day for recording sales or purchases, reviewing invoices, and paying bills. Here’s why:
- If you wait to send an invoice until weeks or months later, you are no longer top of mind for your customer and may wait an extended period of time to get paid.
- Doing regular bookkeeping decreases the chances of mistakes like duplicate entries.
- You’ll minimize the risk of losing important documents or sales receipts.
Always Pay Attention to Your Cash Flow
Paying close attention to your cash flow is one of the most important parts of bookkeeping. In fact, it is crucial to your everyday operations. You should always have an accurate picture of how much cash you have on hand, and what expenses that amount has to cover, in order to help you better run your business. As we mentioned in a previous blog post, being undercapitalized and not having the cash to maintain operations and be able to grow is the #1 reason small businesses fail.
If you uncover a cash flow issue, a line of credit is a great funding option that can give you peace of mind in knowing that funds are always available to use whenever you need them. Like a credit card, a business line of credit provides companies access to a fixed sum of money that is always available to draw upon. Any time cash flow is tight, a business line of credit will allow you to have immediate cash at your fingertips.
Having Adequate Capital Can Help You Grow
Possessing basic bookkeeping knowledge is vital to the overall financial health and success of your company. If while doing your bookkeeping, you discover that your business could benefit from extra capital, contact us at (855) 784-0008 or apply today.