A solid, organized bookkeeping system lays the foundation for business success. By keeping your financial records up to date and accessible, you’ll not only save time and avoid unnecessary expenses, but you’ll also enjoy better performance over the long run. Here are 5 bookkeeping tips to help you stay organized while you run your business.
1. Manage Your Data Efficiently
Consistency and timeliness are critical for efficient data management. When you adopt good bookkeeping habits and an organized structure from the start, you’ll find it easier to:
- Prepare year-end documentation,
- Optimize tax deductions,
- Explore and understand your financial position, and
- Improve your company’s bottom line
Your Chart of Accounts
Planning for growth starts as soon as you plan your chart of accounts. Properly labelling and categorizing your records will speed up your bookkeeping and ensure your financial reports are constructive. Start with the bare minimum, then modify and expand your accounts as your business develops.
Your Source Documents
Recording and reconciling the transactions associated with various business activities is key for keeping your books financially valid. The best time to document expense and income-related events is when they happen. So, make sure your company has a robust day-to-day bookkeeping processes in place for gathering, generating, and archiving source documents like receipts, invoices, timesheets, and other tax records.
Your Accounting Software
One of the most important functions of any accounting system is to make it easy to find what you need when you need it. Digitalizing your payables and receivables with online accounting software like Xero or QuickBooks Online improves data accessibility, and can help do away with the need to store and manage paper files.
2. Use Separate Bank Accounts
We often see business owners using both their personal and business credit cards for business expenses. When you commingle finances, you risk generating tax and liability issues for both you and your business. Setting up and using separate bank accounts for personal and company funds will not only help you avoid the headache of unraveling expenses and income at year-end, but you’ll also benefit from:
- Improved financial forecasting, business planning, and budgeting,
- Accurate tax deductions for shared expenses like cell phones and vehicles, and
- Better positioning in terms of qualifying for supplier credit, business loans, and investor funding
Separating your personal and business bank account also means you’ll be far less likely to attract unwanted attention in the form of tax audits.
3. Take Advantage of Digital Tools
When it comes to organizing your small business bookkeeping, you won’t find a better line-up of helpers than today’s digital apps, automation, and software.
Doing away with manual bookkeeping in favor of online accounting can give your business access to a host of integrated, time-saving apps like Receipt Bank, Plooto, and TSheets. Digital tools like these not only make bookkeeping chores less cumbersome, they also reduce the need for manual data entry which can mean fewer transcription errors.
Business Management Programs
There’s no better way to organize your enterprise than with specialized industry management software. Whether you operate a brewery, construction company, or cannabis dispensary, there’s a dedicated management platform to help you manage your inventory, track production and monitor your sales more effectively.
Automated Reminders and Electronic Payments
Sometimes, just maintaining better control over your cash can make all the difference when it comes to growing your business. If you haven’t yet, consider:
- Signing up for text or email alerts that let you know when credit card and utility bills are ready to be paid,
- Setting up automated payments to deal with recurring expenses,
- Streamlining your receivables by accepting client payments via PayPal or e-transfer
Taking advantage of digital assistants will not only help to keep your cash flow positive, but it can also reduce the fees associated with late or missed payments.
4. Hire a Professional Payroll Service
Going the DIY payroll route means becoming intimately acquainted with regulations surrounding everything from:
- deducting, reporting, and remitting income tax, EI, and CPP, to
- dealing with vacation pay, T4s, and ROEs
Depending on your business model, you may even have to navigate different payment requirements for full-time, part-time, commission, and contract workers.
Many small business owners find it less stressful and time-consuming to work with a payroll service like Payworks – or to outsource their employee payments altogether. Hiring a professional back-office team is often the best way to ensure your payroll process is always completed accurately and on time while staying compliant with payroll regulations.
5. Stay Informed About Your Business
The single biggest benefit of an organized bookkeeping system may be the fact that it’s the only way to stay financially informed about your business. The more you know, the more informed your decisions will be. Making an effort to regularly monitor your accounting transactions and statements will help you plot a successful path forward.
Consider setting aside concrete time in your calendar to:
- Review your business transactions at the close of each day,
- Study your financial statements monthly (preferably with an accountant’s help to interpret the information they contain),
- Evaluate your income and expenses month-over-month and year-over-year, and
- Assess your return-on-investment from various sales initiatives and categories
Formulating an organized plan to track and examine your finances daily, monthly, and annually will help you identify trends and seasonal fluctuations, and highlight areas where your business could be taking steps to improve its short-term and long-term operations. When tax season arrives, you can confidently hand your books over to your tax accountant to maximize your tax returns.
If you're having problems managing your accounting and bookkeeping processes, we can help! At Enkel, we provide bookkeeping services to small and medium-sized business owners. Chat with us to learn more about our services today!