However, unpleasant surprises can often pop up if people do not employ some processes along with a system. Important paperwork is often forgotten, and business goals can easily be missed. These are some of the most important bookkeeping tips that an individual can use for their small business.
Always Plan for Major Expenses
One of the most important bookkeeping tips for any small business is to plan for major expenses thoroughly. Through this, they are less likely to miss any opportunities that come in their small business. At the same time, it prevents them from obtaining a loan especially when the expenses become unbearable.
This can have a huge negative impact on a small business especially when it is just starting. In order for people to achieve success, they should put major business events on their calendar one year in advance. It is also important for them to acknowledge the seasonal downs and ups.
This ultimately helps them in becoming honest about what is coming and adequately plan for it. Through this, people can avoid taking cash out of their business during the flush periods only to discover themselves short in the slower months when expensive projects are needed.
Always Record Deposits Correctly
A business owner usually makes a variety of cash deposits to their bank accounts throughout the year. This includes revenue from sales, loans and money infusions from their personal savings. However, the problem is that they or their bookkeeper might mistakenly record some deposits as the company’s income.
Doing so often results in paying taxes on more money than they actually have made. Recording deposits correctly helps an individual be less likely to pay taxes on money that is not income. To help them achieve this, they should adopt a system for keeping their financial activities straight. It could be a notebook that they consistently use, a simple Excel spreadsheet or bookkeeping systems such as Quickbooks and Freshbooks.
Always Keep a Close Eye on Invoices
Another important bookkeeping tip is that small businesses should always closely monitor their invoices. This is because unpaid and late bills can hurt their cash flow. In order to achieve this, it is important to assign someone in the organization to track billing.
They should then put an effective process in place for making a phone call, issuing a second invoice and perhaps levying penalties such as additional fees at certain deadlines. At the same time, it is important for a small business to have a plan for what happens if payments are one or three months late.
A number of entrepreneurs have a misconception that once they have send out an invoice, they have taken care of the billing. However, this is not the case because every late payment is essentially an interest-free loan that hurts the business’ cash flow.
Always Set Aside Some Cash for Paying Taxes
One basic rule of bookkeeping also states that a small company should often set aside some money for paying their taxes. This is because the IRS can levy interest and penalties on companies that have not filed their quarterly tax returns on schedule.
At the same time, it is important for them to note tax deadlines on their calendar along with preparation time if they need it. This will help them make sure that they actually send the payments when they are due.
This post comes from Aew, who has been trialling the Pure Bookkeeping system in her own home based online business. Aside from learning about bookkeeping, Aew has been reading some marketing books, as well as learning to code.