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The success of a single business depends on several factors; it is especially tricky for small companies to find their place under the sun. Whether the company is in the phase of establishing or it’s already developed, keeping the record of financial affairs is the essence of any business.
Bookkeeping is defined as a sub-area of the management function, and it’s understandable why. This function monitors the stats of the capital that can be estimated in money. Every executive and business owner must consider financial factors before making critical decisions.
Reliable accountants are not just those who consciously and accurately perform bookkeeping; they also have an advisory role in following business laws and adapting to market changes. Serious businesses generally opt for agencies providing bookkeeping services, although smaller companies usually outsource or hire an individual accountant.
Finances are the driving force of any company, so they need to be kept in mind, following the below-explained tips of successful bookkeepers.
Track Business on Daily Level
Business problems often arise as a result of poor financial decisions. One of the main goals of proper bookkeeping is to prevent or, at least, minimize the risk of wrong business moves. In order to gain insights into the entrepreneurial situation, it is necessary to keep the financial records daily.
Cash transactions are performed daily in small businesses. Salaries, payments to suppliers, charging from clients, payment of bills – all these are essentials of cash flow in a company and must be recorded. Even if companies have a minimum payout today, they need a trail of it. Sometimes, due to these small failures in the recording, serious problems can happen. So companies should record everything they do.
Another advantage of daily keeping of financial books is an insight into the balance of unpaid receivables and debts. This way, companies will be able to balance the inflows and outflows easily, but also to adjust the deadlines so as not to pay penalties for the delay.
Weekly Audit of Financial Reports
Keeping the report on the daily level does not mean checking them daily. It’s wasting time and completely unnecessary. Business owners should do the audit periodically. For example, once a week, they could separate the day for complete checking of financial reports. Thus, they will always be up-to-date with financial transactions.
No owner should ignore regular bookkeeping. Except that it can cause problems in the future, it can look suspicious to tax-gatherers, so companies can have legal issues. Timely insight into the records provides the possibility of easier management of financial flows, as well as faster detecting of problems (if any).
Back Up Financial Records
One of the essential characteristics of a responsible institution is the existence of documentation for each transaction company had recently. It’s never known when they might need a financial report from last year. So it’s a good idea to save copies of all financial affairs.
Regular transaction records are a sound basis for establishing a good financial base, which opens up new opportunities for small companies. Today, everything is transferred into a digital form, so there is no need for numerous papers, folders, and file boxes. It’s enough to have an account on any online storage service, and your documentation is safe.
Separate Personal and Business Accounts
Small business owners often use their company’s assets for private purposes. That’s their right since the companies are theirs. However, those transactions sometimes create a gray corporate zone because no financial activity is recorded.
It is, therefore, advisable to have separate private and biz bank accounts. The transfer of funds between these two accounts should also be reported. It’s an outflow like any other payment, no matter where the business owner plans to spend these funds.
Choose Accounting System Wisely
This is the era of computers and digitalization, so bookkeeping software is absolutely necessary for all types of companies. These programs help in the management of business books, summarize and record the financial activities of the company and are very useful in providing documentation for, for example, paying taxes or preparing payoffs for employees.
The types of bookkeeping software organizations will opt for usually depend on which method of accounting companies use. Small businesses mainly rely on cash-based bookkeeping method. This means that revenues and expenses are registered only when charged.
The second method is the accrual method, usually intended for larger organizations or companies that have their own accounting sector. This method requires detailed monitoring of receivables and debts, which is often unfeasible for enterprises with few employees. The cash system is much simpler.
Know Your Obligations
Paying taxes is the responsibility of every single person and the legal entity. Avoiding this obligation often costs more than the tax itself. It can also result in ruining a business reputation. Fees that companies pay differ from individual tax payments. In order to calculate this expense, companies should have regular tracking of business transactions.
States often give stimulus to small businesses, in the form of tax refunds. It is one type of reward, for all those who act by law, keep their books accurately, and have regular evidence of expenses. Tax refunds sometimes can be significant, and these funds can help a lot in further business.
Why Agency Over Individual Bookkeeper?
By using accounting software, the bookkeeping process is easier than ever. The job that was once done by the entire sector today is a task for individual bookkeepers. They don’t even have to be physically present or employed in the company. Many small businesses hire freelancers to keep their business books because it is cheaper than work with agencies.
But financial management is an extensive business and often requires cooperation with other legal entities – tax-gatherers, banks, lawyers, etc. Accounting agencies have full teams of people in charge of such things, so the participation of business owners is minimal. Leaving this part of the job to professionals is a great relief because then the focus can be shifted to other aspects of the business.