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Bookkeeping tips can be too simple for some or overwhelming for others. I have listed 10 tips that are pertinent information when starting a new business. Implementing a routine with the tips below will simplify your bookkeeping duties. The top 10 bookkeeping tips will also assist your business in succeeding to achieve good financial records and management review. Businesses benefit from financial health and it is crucial to cash flow and profits.
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1. Choose a Bookkeeping Software
I’ve stated this many time in my blog posts but, 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 software inexpensive like FreshBooks and Wave. Determine which program is right for you. FreshBooks is cloud accounting and offers a 30-day free trial.
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 any item purchased for the office like ink, paper, etc. into office supplies. Some 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. If you use files for your business receipts simplify what you can. For instance, if you keep track of meals purchased for your business name a file something simple like Meals or Restaurants. If you scan and save receipts, back up all files.
4. Find a CPA or Tax Adviser
It is important that you have someone review your books quarterly or semiannually. 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 end-of-year taxes. The CPA or tax adviser will be familiar with your business and your books. Review and editing ensures a quick and painless end-of-year tax filing.
5. Federal, State, and Additional Tax Money
Another bookkeeping tip is to work with your CPA or tax adviser in budgeting aside money that will be paid to federal and state taxes. For those businesses that need to pay a regular gross receipt tax or service fee be certain to separate these funds, so you pay them on time. 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 be certain to add this percentage into your prices or charge enough to deduct the amount from your sales amount. 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 make cut backs where you discover you are spending more money than needed. A business usually has typical expenses like a water service or uniform service, so it’s looking into cutting back on expenses your business doesn’t need.
7. Reconcile Accounts Monthly
Always confirm that you have your recorded transactions in agreement with your bank accounts or other sources of income. By reconciling your accounts monthly you can catch errors. Therefore, 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
Whether you are working alone or with employees, there should be a designated 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. Customers sometimes need a push to pay their late payments on 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 expenses. Don’t forget that business credit cards and loans should also be separated from your personal accounts. You can lose out on tax deductions if you end up using personal accounts and forget to claim them in as the business.
10. Simplify Payroll
Bookkeepers can run payroll and process taxes that are associated with the payroll. However, I have learned that it is not always necessary to place so much work on yourself that is why I’ve included this final bookkeeping tip. I use Paychex for payroll. They specialize in payroll and they handle all documents and payments. If you only have one person overseeing payroll, you might outsource it to a professional company.