Whether you like it or not, bookkeeping is the glue that keeps your business together. If your records aren’t in good shape, your business could fall apart. A healthy business is monitored through its records on a regular basis, so you can find problems and correct them, before it might become too late. The following phrase really puts this in perspective: If you cannot Measure it, you cannot Manage it.
Read more to discover some very useful tips on how to run your business like an accounting professional.
ALWAYS MAINTAIN AN AUDIT TRAIL:
It can be as simple as a record of all your invoices and checks in numeric order. The thing to remember is never skip numbers, and record voids in numeric order along with the other items. Only, remember to denote them as “voided.” This assures no gaps in your numerical sequence, and leaves a proper trail for your accountant.
YOU ARE ONLY TAXED ON YOUR PROFITS:
A lot of people seem to think they’re taxed on all the money they take out of their business. Not true: Sole proprietors are only taxed on the profits of their business, not on the total revenue. Estimated income tax payments should be based on profits alone.
KEEP TRACK OF BANK STATEMENTS:
Always request a statement with a month-end cut-off date, because this saves time when reconciling records with the bank statement every month. Fewer checks will need to be recorded as outstanding, this way. Also, don’t file statements and canceled checks without reviewing them; view statements immediately for unauthorized checks.
TRY NOT TO OVER CATEGORIZE:
Many of us tend to make things harder than they need to be, in our attempts to “simplify.” For instance, you don’t need separate categories for paper, pencils, printer cartridges, etc. All those items can simply be listed under “Office Supplies.”
START AT THE END:
Determine your expense categories by looking at which tax return you will file. If you file a Schedule C, get a copy of a blank Schedule C, then write down all the categories that apply to your business. Then, you simply include those categories when you set up your bookkeeping system.
SHOULD I USE THE “CASH” OR“ACCRUAL” METHOD?:
The cash accounting system is much simpler for a smaller business. The IRS only allows you to use the accrual method if you have $5 million or more in yearly sales, or if you carry a large inventory.
ALWAYS DEPOSIT CASH RIGHT AWAY:
Always deposit all cash immediately (same day) at the bank or your credit union, once it is received. This ensures that all income will be properly recorded for your own safety, and an audit trail.
USE DUE-DATE REMINDERS:
It’s a good idea to use a payroll tax due date reminder, whether you employ a payroll service or you’re preparing your returns, yourself. Follow a check-off list of all the required payroll tax reports, and include due dates, type of tax, report number, government agency and period covered. Also indicate if you need to submit money, a report, or both.
MAINTAIN DAILY RECORDS:
If you don’t have time for daily bookkeeping, when will you have time to process a whole month’s worth of records? Different people use different record-keeping systems, but what matters most is that you have a system, and use it daily.
PETTY CASH BOX:
Get a metal cash box to hold your currency and coins. The receipt for that purchase should always replace any cash you spend from it. The cash, plus receipts, should remain at a constant dollar amount. Continue using the petty cash box until you run out of cash, then replenish the box by writing a check out for “cash,” expensing all the receipts. Cash the check at your financial institution, put the money into the box and then start back with the same amount.
FROM PAPER TO COMPUTER:
We covered this subject many times before that with todays’ cloud based accounting software’s you save time, reduce clutter and are able to reconcile on a daily basis, rather than monthly. If you haven’t made the switch, now is the time.
And don’t get frustrated when switching to or trying to choose from one of the many accounting software’s, because we are here to help. We can make recommendations depending on your business type, do the initial set up for you, look over your books on a monthly basis to correct any potential errors or do it ALL for you. The choice is yours.
Adopted from “Benjamin Gaul/Writer on Behance.net”