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Bookkeeping tasks can be too simple for some and overwhelming for others. These 10 simple bookkeeping tips will help you smoothly complete your bookkeeping responsibilities and build your business.
The top 10 bookkeeping tips will assist your business in achieving accurate financial records. Accurate financial records lead to up-to-date reports, cash flow, profit, and growth.
Before we get started let me remind you to sign up for my free Bookkeeping Simplified Guide. My Bookkeeping Simplified Guide includes free access to my method on how to put your bookkeeping on a schedule.
1. Choose a Bookkeeping Software
One of the most important bookkeeping tips is to incorporate a bookkeeping method to track income and expenses. I use QuickBooks and have used QuickBooks for many years. However, there are various cloud-based versions of inexpensive software like FreshBooks and Wave. Determine which program is right for you.
2. Keep the Chart of Accounts Simple
A chart of accounts is a list of expenses, bank accounts, liabilities, and more. When you are starting a business make your chart of accounts simple because it is easy to complicate things.
Expenses are items like office supplies. You can group items purchased like ink and paper into office supplies. Software like QuickBooks will incorporate a small list of expenses in the chart of accounts to help you get started.
3. Choose a File System for Vendors
Use a filing system for your vendors. I have worked with both a file folder system and a paperless system. Keeping track of receipts does not have to be a chore.
Make sure and find the best process for you and your business. But remember if you scan and save receipts, be sure to back up all your work files.
4. Find a CPA or Tax Adviser
It is important that you have someone review your books quarterly or semi-annually. An adviser can answer questions about your bookkeeping and help correct any mistakes.
A CPA or tax adviser can assist with any changes that need to be made before income tax season. The CPA or tax adviser will be familiar with your business and your books. Review and editing ensures a quick and painless income tax filing.
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5. Federal, State, and Additional Tax Money
Another bookkeeping tip is to work with your CPA or tax adviser in budgeting money that will be paid to federal and state taxes. There are those businesses that need to pay a regular gross receipt tax or service fee. It is good practice to separate funds due.
Your adviser will assist you in estimated federal taxes and other areas you may need help in. If your state requires a gross receipt tax or an additional fee, do not forget to add this percentage into your sales prices. Remember, you want to make a profit.
6. Budget and Manage Expenses
Use your bookkeeping to manage expenses and future needs. A budget will help find out where monies are being spent. In addition, future expenses can be budgeted in so that money is set aside. A budget also encourages you to adjust the business spending habits as needed.
7. Reconcile Accounts Monthly
Always make sure your recorded transactions agree with your bank accounts or other sources of income. By reconciling your accounts monthly you can catch errors.
Adjustments can be made to rectify any errors. Reconciliations confirm that your books are in a good state. Banks and other income sources usually send out statements once a month, so this is a good time to conduct your reconciliations.
8. Schedule Accounts Payable and Accounts Receivable
Designate a time weekly, bi-monthly, or monthly to pay bills and review late paying customers. Accounts payable and accounts receivable go hand in hand.
You need to receive money to pay out money. Even if you are small and just starting out, conclude whether bills need to be paid immediately or if they have a longer payment period. Every so often customers need a push to pay their late payments for goods or services.
9. Keep Personal Finances Separate from Business Finances
When you start a business, open a separate bank account. Deciphering what is business and what is personal becomes more difficult when you are using one account for both.
By using only your business account for business ensures that your deductions are business related. Business credit cards and loans should be separated from your personal accounts too.
Keep track of expenses so you do not lose out on tax deductions.
10. Simplify Payroll
Bookkeepers can run payroll and process taxes that are associated with payroll. However, I have learned that it is not always necessary to place so much work on yourself.
My final bookkeeping tip is to outsource your payroll to a professional payroll company. I use Paychex because they specialize in payroll and they handle all our payroll documents and payments.