As a small business owner, you likely understand that bookkeeping and accounting, while related, serve different functions. Accounting is more complex and involves determining your company’s financial position, which aids in making informed business decisions. Bookkeeping, on the other hand, involves recording and reporting various financial information and data, providing the information that accounting acts upon. Essentially, bookkeeping provides the data, and accounting helps you use that data to make strategic decisions.
Ideally, your accounting and bookkeeping should be managed by a professional, such as My Remote Quality Bookkeeping. However, if you want to handle some of these tasks yourself, here are some top bookkeeping tips for your small business:
- Know precisely what is included
Of course, bookkeeping involves several tasks, and it includes making your payments and bills, getting paid by your customers, and making sure that your business pays the proper taxes. It also includes such matters as claiming taxes and managing your payroll. With bookkeeping, you need to have three records for your finances: your cashbook, sales invoice, and purchase invoice. The cashbook should include your cash flow record. On the other hand, the sales invoice should have a record of what you have sold, and it should consist of both your unpaid and paid invoices. The purchase invoice is a record of what you have purchased and how you have settled the payment for each. This can be quite overwhelming especially as a new owner of a small business, this is one of the primary reasons why many people choose to outsource their bookkeeping tasks to experienced professionals. Choosing a company nearby is ideal as it means you can be in regular contact without any worries of delay and they can be in your physical location if needed to organise records. So if you were a business owner in the area of Redding, CA, this bookkeeping company in Northern California would be perfectly suited to assist you in handling various aspects of bookkeeping. If you were located elsewhere, doing an online search will likely show you results in your surrounding area.
- Maintain records and choose the correct method
It takes time to maintain your records, but it’s a necessary task and endeavour. You should make proper use of your books to record and track each payment, and you should also note down clearly where you made the payment and where you received it so you can more easily locate the record when needed.
It also pays to choose the right method, whether you will go for the traditional method of accounting with a record of your income plus expenses at the invoice date or cash accounting which records the data on the actual date or day you receive the money or pay it. You can choose cash accounting if you want to decrease your risk of paying taxes on money that you have not received. However, keep in mind that you can only use it if you have a turnover of less than or equal to £83000, as confirmed by the experienced accountants in central London from GSM & Co.
- Always keep an eye on deadlines
It will not do to settle payments beyond the deadline because you will have to contend with fines and penalties. This is especially true if you are making a payment to HMRC. You should also give your clients a deadline for payments so you can avoid chasing down late payments, which takes a lot of time and effort. If you do have to chase late payments, think carefully about whether you should still work with that client in the future because clients who are regularly late can affect your cash flow.
Keep precise track of whatever expenses you have, and to make the process easier, choose the right software – you can use Excel at first, but as your business grows, it may be time to select a package that’s more suitable as well.