8 Bookkeeping Tips to Simplify Small Business Financials Bench Accounting

As a business owner, you’ll most likely have to create a complete financial report at least once a year, for tax purposes. However, there are plenty of reasons to make quarterly, or monthly financial statements as well. Frequent financial reports are a great way to check on your budget, and figure out where you can make adjustments if necessary. There are countless options out there for bookkeeping software that blends a good price with solid features and functionality. For every new small business, it might not make sense to hire a bookkeeper straight away. But as soon as you see growth in your company, it will soon be essential to have a highly detailed, consistent bookkeeping approach.

Log both invoices and receipts—but handle them differently

Generally speaking, your transactions fall into five account types—assets, liabilities, equity, revenue, and expenses. Individual line items are then broken down into subcategories called accounts. In our ice cream shop example, some accounts in your ledger might be “revenue-ice cream sales”, “expenses-ice cream ingredients”, etc. With today’s mobile, intuitive tools, you don’t need to have an accountant’s knowledge—or hire a professional bookkeeper—to log, categorize, and match transactions. Apps like Neat free up time that you can dedicate to other tasks (like selling more of your products/services or finally watching that gerbil video your friend texted you four days ago). Online accounting software can help you make sense of your financial reports, review your budget, and prepare for taxes.

Quick, regular audits of your documentation and transactions will ensure that you’ll never have a stressful night’s sleep—at least as far as your books are concerned. Learn how to build, read, and use financial statements for your business so you can make more informed decisions. If the IRS finds that you don’t have all receipts necessary for your business (from $75 and more), you can get penalized. As a result, you can experience gross income deductions before calculating the tax bracket. Luckily, with simple bookkeeping tips in this article, you can streamline the whole process in a matter of days. As long as you automate tasks and pick the right bookkeeping system for your specific needs, you’ll have an easy time implementing all the advice above.

Implement Accrual Accounting Early

1. Plus, you can ensure your payroll account has enough money even if the primary account suffers.
2. Luckily, most modern-day bookkeeping and accounting  software have tools that make cash flow tracking a breeze.
3. At the end of the accounting period, take the time to make adjustments to your entries.
4. First, you’ll have to expand your definition of the word “accounts.” In bookkeeping, accounts are categories like income, expenses, assets, liabilities, or equity.
5. Generally speaking, your transactions fall into five account types—assets, liabilities, equity, revenue, and expenses.

If you bill a customer today, those dollars don’t enter your ledger until the money hits your bank account. Under single-entry, journal entries are recorded once, as either an expense or income. Assets and liabilities (like inventory, equipment and loans) are tracked separately. If you’re just starting out, are doing your books on your own and are still in the hobby stage, single-entry is probably right for you.

Accruals

This can be sufficient for very small businesses that aren’t incorporated. It will be even easier to keep your records organized, stay on top of time management, send out invoices and more in a cloud-based accounting software like QuickBooks Online. When you first begin the bookkeeping journey, collect everything you have that could be relevant to establishing financial history. Accountants rely on bookkeeping records to analyze and advise on the financial activity, health, and growth potential of a business.

Also, well-documented and organized receipts can significantly help during audits. Accurate invoicing is the key to getting paid in a timely and organized manner. Block out a weekly time to get your paperwork in order and avoid letting the receipts pile up. Stay organized throughout the year, instead of scrambling at the end during tax season.

The right accounting strategies can streamline cash flow management, optimize tax savings and bring a new level of efficiency to your daily operations. Never leave the practice of bookkeeping (or your business assets) to chance. No matter what system you implement, incorporate a practice of reconciliations, by comparing the numbers in your system to the source records, like bank statements, receipts, and invoices. This habit improves communication, boosts transparency with your bookkeeping team, and promotes longevity and compliance. For both sales and purchases, it’s vital to have detailed, complete records of all transactions. You’ll need to note the amount, the date, and any other important details to ensure you can accurately summarize your finances when it comes time for tax season.

The two primary methods are accrual accounting and cash accounting. The difference between the two methods is how they record the inflow and outflow of cash. Create a solid internal structure for following up on your accounts receivables. Pick a free cash receipt templates day to process and mail your invoices and another date to follow up on aged accounts receivables. Extend credit on moderate terms, if needed and make sure to document everything to pursue payment through a collection agency or the court. QuickBooks Online users can choose QuickBooks Live Bookkeeping to get year-round access to verified experts who are focused on their success.