Bookkeeping is an essential business function that contributes directly to your organization’s sustainability by providing insights into its financial health. Accurate records help a business budget effectively, invest wisely and plan successfully to meet its needs.
For the small business professional, in-house bookkeeping can present a challenge. Small organizations often work on tight budgets and with fewer team members than larger companies. The risk of errors can increase when someone without bookkeeping experience or knowledge handles the responsibilities. Fortunately, you can take a few steps to help mitigate these risks, such as brushing up on the basics so you can avoid common mistakes.
Fundamental Bookkeeping Tips
You can take multiple steps to simplify the bookkeeping process while implementing solid internal controls.
First, establish a business account and credit card for your organization. Separate accounts are a must if your business structure is anything but a sole proprietorship, and they can be beneficial in many other situations as well. Having a distinction between personal information and company data makes tracking expenses and preparing for tax time much simpler. In an IRS audit, commingling this information can add layers of complexity and extra time to the process.
Keeping business information separate also allows you to take better advantage of digital tracking tools. Software solutions offering online management and funding for expenses can eliminate lost or damaged receipts by allowing employees to upload photos of them to electronic filing cabinets. These platforms help ensure accountability and accurate allocation. You can fund an employee’s account with the precise amount of a known expense to limit spending.
Accounts payable and receivable software solutions can also help speed up your payment cycles and integrate with existing accounting systems for convenience. Use them for fast online bill payments to vendors or to generate and send customer invoices with a few clicks. The information automatically populates to programs like QuickBooks to eliminate manual data entry.
Familiarize yourself with the reporting tools your software offers, too. Analyzing profit and loss statements offers actionable insights into spending and costs between comparison periods. Plus, these reports deliver crucial information on other key aspects of your business’s financial health, such as return on investment, debt-to-equity ratios and average receivable age. This data is valuable for informing budgeting and planning tasks.
How to Avoid Common Bookkeeping Mistakes Small Business Owners Make
You can also improve your bookkeeping by recognizing and avoiding some common pitfalls. Keep these tips in mind.
1. Have a Data Backup Plan
Fires and natural disasters pose risks to paper-based and digital records, and the likelihood of wholly and accurately recalling and reconstructing lost data is low. Establish a robust process to ensure access to synchronized duplicate records and enforce your policy without exception.
2. Plan for Taxes
The IRS and state revenue agencies can levy penalties and interest for companies that don’t pay their taxes by the required due date. Consider setting aside funds in a separate business account to have them available when you need them. Mark your calendar the first of each year for one to two weeks before the due date to ensure you’re paying on time.
3. Pay Careful Attention to Payables and Receivables
When you’re focused on your business’s core mission, it can be easy to forget who hasn’t paid an invoice on time and who needs to get paid when. Choose an accounting program to help manage payables and receivables more effectively with features like automated payment reminders for you and your customers.
4. Track Every Expense
Tracking every expense, no matter how minor, helps offset the income your business generates for a lower tax bill. Categorize each outlay with a description that works for you so you can account for them accurately come tax time.
5. Trust the Right People With Bookkeeping Responsibilities
Not every small business owner or employee has the specialized knowledge good bookkeeping requires, resulting in the potential for costly errors at best. At worst, handing the responsibilities off to a single individual opens the door to unnecessary risks from bad actors and fraudulent activity. Regain peace of mind and extra time by partnering with highly qualified professionals.
Outsource Your Bookkeeping With Marshall Jones
Marshall Jones has served businesses in the greater Atlanta area with accounting solutions for over three decades. Our certified public accountants and advisors have in-depth expertise across numerous industries to deliver high-quality bookkeeping services to organizations of all sizes.
Contact a team member online to request a custom quote or get more information.