Bookkeeping for small businesses is extremely essential as opposed to what most people think. business bookkeeping becomes important when one needs to control expenses. Hiring accounting services for small businesses might sound like an extra expense, but it is worth it.
- Budget for the future. Estimate where your business income will come from over the next one to three years and project where you think you are. It can be complicated because there are factors you can’t control, like inflation or what your customers might do. However, it can still help you understand where to invest your income during the off-season when demand for your products or services may be slow. Take stock of what your business may need in the short and long term. For example, do you need to replace your computer systems or purchase new equipment? Planning for major expenses, repairs and maintenance can keep things running efficiently.
- Track receivables. Accurately track all deposits to your business bank account throughout the year. If you can’t explain where your funds come from, you may end up paying taxes on funds that aren’t real income. Bookkeeping for small businesses can help you tackle this.
- Track your customers’ invoices. Are your customers paying their bills on time as agreed? You have to keep up with it. Create a plan if customers are late paying their bills, such as issuing a second invoice, calling them to kindly remind them that their account is past due, or adding additional charges if deadlines are not met.
- Budget for paying taxes. You know you have to pay taxes, so get in the habit of saving the necessary funds you owe the government throughout the year. Failure to prepare can result in unpleasant surprises come spring when tax season arrives, such as an audit or a significant tax bill that could result in interest or financial penalties from the CRA. Hire accounting services for small businesses to have this done.
- Get E&O insurance: E&O insurance, also known as professional indemnity insurance, protects you from claims or legal action for alleged financial loss as a result of service provided, negligence, or failure to provide service as promised. It also covers your legal defense costs if you are sued, as well as any money judgments or court-ordered transactions up to the amount of your policy.
- Track your inventory accurately. It is essential to have accurate stock data and an integral part of business bookkeeping. Whether you regularly count your inventory by hand or use an inventory management system to automate the process (provided it’s integrated with, say, a store or automated accounting system), the more organized you are, the better. Good inventory management practices can help avoid discrepancies in your accounting.
Frequently asked questions
Should I automate accounting processes?
Automate your accounting processes. You may be able to track your finances manually for the first two years of your business, but using the capabilities of accounting and business bookkeeping software to automate certain tasks can make things easier and reduce the risk of error.
Should I make use of accounting software?
Whether you use it or give an accountant or bookkeeper access to your account, small business accounting software can reduce the day-to-day tasks of financial monitoring, and you should be able to link it to your business bank account. This in turn makes it easy to keep track of your income and expenses, gives you a clear view of where you stand, and you can easily generate reports to understand where every penny is going. You can do business Bookkeeping for small businesses via accounting software very easily.
What if I mix my expenses with my business expense?
Use separate bank accounts. Don’t confuse your finances with your corporate finances. Instead, keep separate business and personal bank accounts. A business bank account makes it easier to track expenses and take advantage of tax deductions, and some financial institutions may offer a line of credit option for use in the event of a short-term liquidity crisis.
If I maintain records, should I keep receipts?
Keep your receipts. Keeping business receipts for purchases made will be useful at tax time so you can claim business expenses. It doesn’t matter what the receipt is for, whether it’s office supplies or new equipment. Knowing what expenses to incur each month makes it easier to keep track of where your money is going.
Is getting Get Errors and Omissions (E&O) insurance beneficial?
E&O insurance usually accompanies other types of business insurance to provide comprehensive coverage for your small business, such as commercial general liability insurance and cyber liability insurance. Imagine what the costs would be if you were the subject of a third-party lawsuit. Without insurance, it could threaten the survival of your business.
Hire a professional accountant. It never hurts to hire an experienced professional to manage your finances, even if it’s just for a few hours a month. Hire accounting services for small businesses to rid yourself of the worries. While an accountant may focus on recording and classifying your expenses and income, an accountant can go a step further by helping you strategically plan your budget and file accurate tax returns. In addition, the accountant will be aware of some cancellations, deductions, and other loopholes that will help reduce your tax bill.