7 Bookkeeping Habits Everyone Should Adopt
Badly tracked finances can cause your business a world of
problems—from poor cash flow to improper tax filings and beyond. These kinds of
problems can put a young business at serious risk.
Good bookkeeping habits, on the other
hand, can help a business thrive—and not just survive.
Dallas-based financial writer and
founder of Careful Cents, Carrie
Smith, shared her advice on what good bookkeeping means for entrepreneurs, and
the good habits to adopt that will guide your business to success.
1. Get professional help to prepare tax returns
Business owners are pulled in a dozen
different directions. That’s why it makes sense to outsource work you don’t
have the expertise or time to do. If you’re like many entrepreneurs, you likely
went into business to pursue a passion, not to become an accountant.
“Sometimes outsourcing the job to
somebody who can do a quicker and better job is much smarter than trying to
tackle it yourself,” Smith says.
Professional accountants can do more
than just ensure your returns pass muster. A trained financial eye can spot
ways that your bookkeeping processes—and perhaps your business itself—can be
improved.
For example, most businesses aren’t
aware of all the tax deductions they can claim to ultimately reduce their
overall tax burden. With a trained eye, Smith was able to able to help one of
her past clients save over $1,000 on her return, which took her from owing
money to the IRS to receiving a small refund.
2. Don’t go entirely “hands-off”
Outsourcing your bookkeeping doesn’t
mean you should leave it entirely to somebody else. “You’ll want to review
reports, understand what’s happening with your business, and ask the right
questions (when you don’t),” Smith says.
No matter your level of accounting
expertise, it is beneficial to your business for you to understand as owner
some of the basic business numbers, including profit, trend in expenses,
accounts receivable, profit per customer, and how your client funnel works. Here is an
article that summarizes why these five numbers matter and how you can use
them to monitor the health of your business.
3. Get the right software
“You don’t want to skimp on the program
that you use,” Smith advises, noting that a good system is worth the money.
These days there is more choice than
ever, so businesses no longer have to use accounting software
designed for accountants.
There are many different options out
there, so look for a system that best meets your business needs—and one that
you’ll actually use. If you’re not an accountant by training, then avoid
systems that require a telephone book sized manual to get started.
If you’re looking for a shortcut, ask
for recommendations from friends who run businesses similar to yours.
4. Document your processes
For her own business, Smith has written
documents that explain how bookkeeping processes should run. “No matter who
looks at it, it’s done my way,” she says, noting these processes prevent
confusion and answer questions before they’re asked.
Consistency is key for good bookkeeping
and can help you spot errors later on, since you’ll have a good idea of what
may have gone wrong.
5. Keep expense receipts
You can’t know how much you’re spending
on your business if you don’t keep receipts. This is somewhat straightforward
for credit card purchases, since you’ll have both receipts and monthly
statements against which to check them.
Where things can get tricky is if you
aren’t careful with cash expenses. These receipts matter even more since there
are no backup statements. Some people keep a small notebook with them to log
cash expenses as they’re incurred. Better yet, entrepreneurs could follow
Smith’s lead—she uses an accounting app on her phone to snap pictures of her
receipts as she goes, and doesn’t keep the paper copies.
6. Track your receivables
It’s one thing to issue invoices, but
it’s another to ensure your invoices are paid. Keep up-to-date logs of your
invoices and the status of each—sent, received, paid, partially paid, and late.
Some accounting solutions can even keep track of invoices and flag late and
unpaid invoices automatically.
7. Ask your accountant how you can work as a team
Business owners often look at their
accountants as just another expense, and only visit during tax crunch time. A
trusted accountant, however, can be a key ally in your business, helping to
guide its path to success, shaping it to provide better returns, and helping
spot potential issues in the business before they arise.
Entrepreneurs should approach their
accountants as business partners, not just tax prep, and find someone who can
offer insight into the business. A great accountant can help take a business to
the next level.
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