As a small business owner it is very important to know how your business accounts work. Good bookkeeping can prove to be extremely beneficial in running a successful business. So, it is important to know some tips for small business bookkeeping.
The topics covered in this article are:
- Importance of good accounting
- Accounting Tips for Small Business Owners
1. Importance of good accounting
A good accounting system is necessary to survive every business. Accounting includes payroll records, cash book, credit book, sales invoice, debit ledger, credit purchase ledger, cash payment vouchers, asset records, the bank transaction ledger and the inventory ledger.
Good bookkeeping is important because it:
- Helps to assess the performance of the company by giving an in-depth review of the financial performance.
- Help manage cash flow and meet deadlines by showing areas of the business that need cash and indicating when invoices are due.
- Help set new weekly, monthly and annual business goals by evaluating business performance against previous years.
- While the accounting tasks of a business can be done by professional accountants or chartered accountants, it is important for a business owner to understand the basic workings of business accounts.
2. Accounting tips for small business owners
The following accounting tips can help with good small business bookkeeping:
- Bookkeeping frequency: Bookkeeping may be the lowest priority for business owners who undertake business accounting on their own. If the bookkeeping is outsourced to a professional accountant, it is important to ensure that the accounts are kept regularly. This will eliminate the problem of accumulating accounting work and the chances of missing or forgetting important data will be reduced.
- Regular review of accounts: When outsourcing bookkeeping to professionals, it is important to regularly review the company’s accounting books to understand its operational status. The operation of the business will become clearer by doing this and it will become easier to find where there is room for improvement and where the allocation of resources is needed. In addition, the unscheduled review of accounts also helps to ensure proper bookkeeping at all times.
- Seasonal cash flow: Business owners need to be aware of their annual and seasonal cash flow. Being aware of the ups and downs of cash flow will provide a clear picture of when to grow and consolidate. This will help plan when to invest in promoting the existing product and when to improve the product by adding new features.
- Accounting checklist: It is important to understand the basics of accounts when running a business. Sitting down with your accountant or other professionals and understanding the basics is a good way to learn accounting. Creating a checklist of the essentials of accounting that you want to familiarize yourself with with their corresponding numbers will help you understand accounting better. This will help to get a clearer picture of the accounting structures of the company.
- Tax details: Every business owner should be aware of the amount of tax their business pays. For sole proprietors, the business taxes will be the personal taxes of the owner. Therefore, knowing the amount of tax paid will provide a better understanding of deductible expenses, the types of taxes paid, and the rate at which those taxes are paid. Knowledge of annual taxes will clarify how withholding taxes are to be filed and how much resources will need to be set aside for the payment of these taxes.
For any beginner these accounting advice can be of great help in developing a more planned and comprehensive business growth strategy.