In small businesses, focusing on actionable metrics and optimizing your financial system is the crucial ingredient to simplifying your business’s financial management and clearing any financial confusion.
The more organized, structured, and optimized your bookkeeping methods are, the easier it will be for you to analyze your profits and ROI and make strategic business decisions that help your small business flourish.
This article will help you with well-researched and proven small business bookkeeping tips to help you get your finances in accord and help you leverage your business resources more effectively and economically.
1. Assign the task of bookkeeping as a part of your routine
The idea of doing business accounting when you are nearing your tax dates can be dreadful and could cost you more on a large scale. The best way to simplify small business accounting is by incorporating bookkeeping tasks into your daily routine, most likely in the last hour of your daily work.
By breaking the entire accounting task into smaller chunks and allotting time to each of these tasks sequentially, you can get your finances done quickly and efficiently while having an idea of your day-to-day profits and expenses. Some of these tasks include:
Checking on payments and invoices and making a track record
Reviewing before paying for expenses and invoices
Categorizing expenses and expected payments
Maintaining track of all receipts and documents
Reviewing day-to-day financial statements and keeping a record of them.
If you incorporate these tasks and dedicate an hour daily to bookkeeping, you will be updated with your business accounting records and can ensure your financial records are clean. Whether your small business deals with business income insurance or eCommerce products, your accounting game needs to be strong.
2. Always keep your personal and business accounting records separate
An extremely important tip to simplify business finances is to make sure from the start of your business that your business and personal finances must be dealt with separately. This means having a separate bank account from where only business transactions will take place. You should never make the mistake of incurring business expenses or debts from your account.
In small businesses, each transaction must be accounted for to estimate the prospects of a business. Therefore, any debit, credit card, or online banking methods your business uses will be transacting strictly from the business account, simplifying the entire reconciliation process. As a result, you will also be able to track your profits and expenses without mixing your transactions with personal expenses.
This will also help you estimate monthly or quarterly gains, and you can withdraw an amount every month as a salary if you are the proprietor or sole owner of the business. This procedure eases the bookkeeping process essentially, making the task of financial accounting an easy breezy process.
3. Make it a habit of documenting every transaction, small or big
Starting a business from scratch, big or small, involves numerous transactions which need to be accounted for if you are looking for profits and ROI in the long run. Moreover, if you are looking forward to having a clean record, you must keep a record of each transaction and document the receipts.
This could involve transactions for goods and services, employee salaries, etc. As your business expands, your transactions will be more frequent and in more significant amounts. Hence, documenting each transaction regularly can significantly streamline your bookkeeping process and help you sleep peacefully at night, knowing that your finances are taken care of, and you aren’t in the dark about the significant figures.
4. Keep a record of cash payments
While online payments or card transactions can be traced through bank statements or online banking applications, cash transactions don’t have an auto-record procedure. You must keep a thorough record of your cash transactions daily.
You can use online bookkeeping software or maintain an Excel sheet to keep a detailed record of cash transactions. Alternatively, you can maintain a receipt book that will duplicate the receipt for each cash transaction, helping you to have the record in one place.
Once you start documenting the cash flow in your small business bookkeeping, it will be easier to estimate your monthly cash transactions, and you can always go back to the records as and when required.
5. Get Digitized
The best part about accounting or bookkeeping in 2023 is that we are living in a digitized world where multiple tools and applications for business functionalities help small and large businesses tremendously.
You can streamline your bookkeeping with accounting and bookkeeping apps that are dynamic and highly customizable. They have manual functionalities which will do half the job for you, making it super easy for you to maintain your balance sheets and stay updated with the status of the accounts.
6. Avoid inventory tracking in your accounting system
According to an article by Forbes, it is better to keep your accounting separate from inventory management. As a small business, you can track your inventory expenses through inventory management software instead of incorporating them into your financial account, which involves day-to-day transactions and other sources of income.
This helps keep your financial records optimized and easier to configure, making your bookkeeping tasks seamless and efficient.
7. Pay off your bills on time
If you don’t wish to end up in a business debt or find an ugly figure on your finances by skipping payments that you owe to other vendors or partners, stick to the golden rule of paying your bills on time. This will help you comprehend your financial status in real-time and eliminate late fees, which can be detrimental to any company’s growth.
Besides, paying off your bills on time keeps you in the good books of the third parties or vendors you work with, and you can gain access to several privileges and offers that a small business can benefit from.
8. Budget your expenses and establish financial goals
While keeping a record of business expenses is crucial, an ideal way to leverage your business in the long run and keep your bookkeeping secure is by budgeting your expenses and establishing financial goals. If you plan significant investments ahead of time and analyze your financial accounts, you will have clarity on the status of your business finances and strategically move closer to that goal!
Moreover, if you budget your finances, then bookkeeping records will help you understand the trend of your expenses and stay cautious as and when you seem to go over the budget. You will better have the resources to make financial decisions more confidently.
9. Hire a Professional
If you run a small business, there is already a lot to take care of! In such a scenario, if you feel like it’s becoming overwhelming to look after your finances thoroughly, the ideal way to go about it is by hiring a professional who can help your business with accounting and bookkeeping while suggesting financial advice that can dynamically improve your business growth.
These professionals have the expertise and knowledge to navigate the different challenges and bottlenecks associated with your line of business and chalk out a robust plan of action that helps you save and maintain your finances smoothly. Financing is a broad term and involves a lot of aspects that need to be taken into consideration.
With a professional bookkeeper, you can get frequent updates and inputs and make the necessary changes without devoting your time to figuring out the best financial moves for your business.
Streamline your finances with strategic bookkeeping methods!
With startups and small businesses becoming a common phenomenon in every sector, it is essential to pay equal attention to every aspect of a business to have that polished edge and grow as a business entity. Especially if you own a business income insurance firm or financing agency, you must ensure your finances are on a clean sheet to grow.
Finance is the root of this growth; hence, it is extremely important to streamline accounting methods seamlessly.
A robust bookkeeping system can help you foresee your business long-term, plan big moves, make informed, strategic decisions that will not be counterproductive, and help your business scale. A clean balance sheet gives you a clear insight; hence thorough bookkeeping is essential to any business, big or small. To learn more about small business hacks, follow our blogs on our Asteya website and stay competitive.