This responsibility is typically the job of someone with accounting or bookkeeping experience. Very often with small businesses, it ends up being one more thing that the owner takes on. For many, it's a task they're not exactly well equipped to do properly, even with the aid of online financial tracking software.
More than 40% of U.S. small business owners consider themselves financially illiterate, according to a study conducted by Intuit and Decipher Market Research. The same study found that 81% elect to handle their business' finances themselves.
Whether you have a financial professional on the job or are a business owner wading your way through, adopt these strategies to improve how you manage your firm's financial accounts and avoid costly bookkeeping mistakes.
Insist on Accuracy
Without accurate tracking of your business' activity, bookkeeping is of little use and can lead to costly problems like being late on bills and falling short on payroll. It can also complicate your ability to comply with tax laws.
To avoid this, insist on accuracy with every transaction from the person tasked with maintaining your books. Ask for weekly updates so that you can spot any problems before they get out of hand.
If you find an error, it's essential to get in the habit of fixing any discrepancies right away. It’s important to reconcile your accounts regularly because even a small error can become a needless distraction when it comes time to close out your books at the end of the month. Addressing errors quickly also ensures you have an accurate view of how your business is doing.
Using an integrated accounting system can simplify this process by handling a lot of the record tracking automatically. A key benefit of an integrated system is that you can more easily capture a comprehensive view of your business' costs, which is essential to growing and staying profitable.
Don't Mix Personal and Business Accounts
Mixing business and personal transactions often happens in the early days of a business, but it can become troublesome when it comes to keeping the firm's books in order.
It can make it more challenging to sort out your personal from business transactions, which could lead to missing an expense that you could list as a business deduction, for example. Blurring the line on your accounts can also be a problem when you apply for a business loan or line of credit as lenders expect an accurate tally of your business' finances when they consider a loan application.
Simplify how you or your bookkeeper tracks your business spending by opening a business bank account that you don't use for personal transactions. A business credit card can also be useful in that it often comes with highly detailed and accurate records of your transactions, which you can sync with your bookkeeping software.
Optimize Your Invoicing
Tracking when revenue is supposed to come in and when it actually arrives is a crucial aspect of bookkeeping. If your customers are accustomed to paying your invoices late, it can be challenging to rely on your accounts receivable figures to manage your cash flow.
It’s important to have your bookkeeper invoice your customers immediately after you've delivered on your end of the transaction. Use email or bookkeeping software that can send invoices directly. Tools like FINSYNC’s cash flow management system can send out invoices, as well as manage and forecast cash flow, among various other accounting tasks.
Maybe It's Time to Hire a Pro?
The do-it-yourself approach to bookkeeping may not be the best approach for your business, especially if you aren't able to set aside enough time to stay on top of your books, or if you're not comfortable navigating accounting software.
In that case, why not hire a professional bookkeeper? They will help minimize errors and give you peace of mind that your accounts are balanced properly.
Consider hiring a bookkeeper licensed by the National Association of Certified Public Bookkeepers. They mainly record your business' financial transactions, typically on an industry standard accounting software. Look for someone who is experienced and detail-oriented. They should also be comfortable using the latest online bookkeeping software.
Finding someone with online reviews is always a good idea so you can get a sense of intangibles not readily visible on a resume, such as work ethic, temperament and performance under pressure. Another differentiating point when deciding whom to hire should be whether the person has experience in your industry.
If you can't afford a full-time bookkeeper, hire one who will work remotely on a freelance basis. Some 14% of companies outsource their bookkeeping services, according to a survey of small businesses by Wasp Barcode Technologies.
A number of virtual bookkeeping marketplaces make it easy to find skilled financial professionals. Going with a virtual bookkeeper also costs less, because you don't have to pay for health insurance, sick days or other benefits. FINSYNC's virtual community of specialists provides businesses with support for bookkeeping, as well as accounting, human capital management, financial analysis and corporate strategy.
More Bookkeeping Best Practices
Get ahead of potential tax complications by ensuring you track employees accurately, depending upon whether they’re full time or freelance. You may also want to hire a company to process your payroll. They can make certain that you’re in compliance with employee tax withholding requirements.
Set aside time to do your bookkeeping tasks every week. It'll keep you from falling behind and losing track of something crucial. Using a business credit card can also help optimize this process because it automatically tracks spending.
Review whether your accounts are well organized. Bookkeeping can yield great insight into how your business is operating just by looking at your accounts, but only if they are organized efficiently.
Consider grouping any accounts that are part of your business' general expenses, such as the electric bill, rent and similar costs that go toward keeping your business running. Then, do the same for marketing, advertising and other expenses incurred as part of selling your goods or services.
This will help you more efficiently see how much of your revenue is going toward basic expenses that you may want to reduce or cut, and how much you're paying to win over customers.
Ensure that you have systems in place to regularly back up all of your bookkeeping files daily. Using cloud storage is ideal and easy enough to do so that if something happens to one of your devices, you’re covered.
Rely on technology to track employee hours. Time-tracking software has many benefits over the old-school timecard approach. For bookkeeping purposes, the biggest plus is it eliminates duplication of data entry and allows a clearer and more accurate snapshot of your labor costs, including any overtime. All of this data can be used in conjunction with payroll software to streamline your payroll process.
Consider handling your bookkeeping on software that links up all your firm's accounts online. The key benefit here is to help you manage your business with a real-time view of your finances, which can save you time and money.
Eddie Davis is the VP of Business Development for FINSYNC, a consolidated cash flow management platform focused on helping businesses grow. FINSYNC’s intuitive online tools help automate payments and accounting, and provide valuable insight through cash flow analysis. The lending network gives businesses access to fast, affordable financing. FINSYNC’s virtual community of specialists provides unrivaled support with bookkeeping, accounting, human capital management, financial analysis and corporate strategy. Connect with Eddie on LinkedIn and follow @FINSYNC on Twitter.