What is bookkeeping and why is it important?
Let’s start from the beginning, bookkeeping is keeping track of the financial records of your business. These records include all financial transactions in your business.
But why is it important?
Good bookkeeping can help to grow your business! By keeping on top of your business’ bookkeeping you can forecast your business’ finances, which will help you understand your business and learn how you can grow.
You should apply a good bookkeeping system in your business from the moment you startup.
To help you begin a good bookkeeping system in your business, we have listed our top 5 tips for bookkeeping.
1. Schedule your bookkeeping
If you have an important call to make you will schedule time for it. So why not schedule time for your bookkeeping?
Schedule a time every week or month to spend time going over your bookkeeping. It will save you time in the long run and you can be stress-free at the end of your financial year!
If you outsource your bookkeeping, it's still a good idea to schedule time for your books. By checking on your bookkeeping you are aware of your company standing and can help you plan for the future.
2. Keep organised records
As we’ve mentioned, it is important to keep your records. But make sure they are organised records. Disorganised records will make bookkeeping difficult and stressful when it comes to your financial end of year.
There are two ways you can organise your records;
- Physically – If it suits you to keep physical copies of your records you can keep an up to date folder or binder of all your transactions and bank statements. You can organise this by the type of transaction and the date.
- Digitally – If you want to keep digital copies of your records it’s important that you keep a record of every transaction, not just what is in your accounting software. If you are thinking about keeping records digitally you can also use online storage systems such as Dropbox and Google Drive.
3. Separate your finances
It is best practice to open a business bank account when you set up your company.
Having a separate bank account and credit card for your business will make it easier to navigate your records.
By having a separate bank account for your business you can see any issues in cash flows. You can also claim tax deductions for business costs more accurately.
4. Take control of accounts receivable
Accounts receivable means money owed to a company. You may have accounts receivable because a client has not yet paid for a service.
The best way to stay on top of your accounts receivable is by setting standards early in your business.
To take control over accounts receivable you should:
- Send out invoices with clear terms of payment.
- Communicate the consequences if payments are missed.
- Follow up with your clients and send them reminders
If you don’t take control of accounts receivable, your business is at risk of being in a negative cash position.
5. Find a good adviser
If you find yourself stressing over your bookkeeping, it may be a good idea to outsource this task.
Contrary to popular belief, outsourcing your bookkeeping can actually save your business money!
A bookkeeping professional will make sure your bookkeeping is done correctly, avoiding penalties or fines at the end of your financial year
If you do want to outsource your bookkeeping you should look for someone who can:
- Answer specific questions,
- Teach you how to effectively navigate hurdles,
- Serve as a fresh set of eyes to identify and solve mistakes.
Bookkeeping can be overwhelming if you don’t have a strategy. Once you find your routine for bookkeeping it can save you much more time in the future and will ensure you fulfill tax requirements.