If you’ve finally taken the plunge and started your own business, you are in for a great experience. There is a lot of hard work and risk involved in owning a business, but nothing compares to the satisfaction of watching your own venture grow and become successful. We have put together an exclusive list of 10 bookkeeping tips to start your business on the right note.
- Keep Receipts for All Transactions
Receipts for all the transactions are a must for a healthy bookkeeping system. Some businessmen believe that if they are using a check or credit or debit card, they do not need a receipt; they can just refer to their bank account and get the details. But the Internal Revenue System (IRS) policy clearly states that any cash or check transaction needs receipts to be validated. If you cannot produce relevant receipts for transactions, you cannot claim certain tax benefits.
- Indulge in Daily Bookkeeping
Maintaining daily records of financial transactions is one of the most important aspects of bookkeeping. If the day-to-day bookkeeping is not up to the mark, then the business can fall apart. If you do not have the time to take care of these administrative duties, consider hiring a firm providing bookkeeping services.
- Be Consistent in Bookkeeping
Many small business owners start their bookkeeping with a lot of enthusiasm, but in time, they fail to maintain it consistently. Inconsistency in bookkeeping may be the biggest mistake you make and might prove fatal for your business. As soon as you start your new business, the first pledge must be to maintain your accounting and bookkeeping. If you cannot take care of it yourself, hire an accounting bookkeeping firm to do it for you.
- Keep a Trail for Audit
Your bookkeeping should be done in such a way that you can easily retrace your business’s financial transactions. This is not a complicated process and can be done in simple steps like keeping records in their numeric order, not skipping invoice or check numbers and maintaining separate records for your business and personal transactions. If you can trace your business’s financial transactions up to a year backwards, consider your record keeping perfect.
- Get a Bank Statement at the End of the Month
Many businessmen believe that simply logging into a bank account and checking the transactions will enable them to reconcile their business expenses. But it is a more complicated procedure than that. Getting a bank statement at the end of the month would be a good idea to reconcile all transactions and track expenses.
- Use the Right Accounting System
Determine whether the cash or accrual is the right accounting system for your business and use the one applicable. The IRS requires that if your business has more than $5 million in sales or keeps and inventory, you use the accrual accounting system. (The cash method of accounting counts expenses when you pay them and income when you receive it, whereas in the accrual method you count the income and expenses at the time they happen)
- Maintain a File for All Documents
This may sound a simple enough step, but most businessmen fail to follow it. As a result, the end of the financial year has many businesses and their accountants struggling to find documents to support financial transactions. If you simply maintain a file for all the transactions and file the relevant papers at the time of their occurrence, the end-of-the-year hassles won’t happen.
- Keep Business and Personal Transactions Separate
Having a separate bank account and credit card for your business is a must for a healthy bookkeeping system. That way, you can keep your personal transactions separate and at the end of the year, claim applicable tax benefits on business transactions.
- Use QuickBooks
Using popular softwares like QuickBooks helps in maintaining proper accounting and bookkeeping records for your business. Such softwares make it easy to calculate incomes and expenses and make a great backup system for all your documents. Many known accounting and bookkeeping firms use this system and can help you integrate it into your business for you.
- Hire a firm providing bookkeeping services
If all the above points sound too much of a hassle for you to keep in mind, it may be best to hire a professional firm providing expert bookkeeping services.
A professional accounting and bookkeeping firm can take all the responsibility for your day-to-day functions so that you can concentrate of growing and expanding your business.