Owning a small business can be an exciting adventure, but not all aspects are fun and games. It can be easy to dismiss bookkeeping as a priority. Staying on top of finances may not appeal to everyone. But running a successful business isn’t just about exceeding the day to day tasks. You also need to keep the bigger picture in mind to understand where your business is financially.
|Bookkeeping involves analysing financial information and using this knowledge to understand the financial position of your business.|
Small businesses are the backbone of the Australian economy. In Australia, 2,065,523 small businesses account for 97 per cent of all businesses. They create jobs, provide products and services, and ensure future growth.
Yet 50% of small businesses fail within five years, and only 30% of them survive for ten years or more.
A lack of financial expertise often contributes to their failure – this is where effective bookkeeping comes in. Small businesses may not have the resources larger companies do, but they can certainly implement strategies to increase their chances of success.
For your small business to survive – and thrive, you cannot avoid bookkeeping forever. If you want to stay on track with your business finances, these tips and tactics will help you understand the process and make it less of a chore.
1. Keep Separate Business and Personal Finances
In a small business, the lines between a personal expense and a private one can easily become blurred.
Suppose you don’t set up separate bank accounts for your personal and business finances. In that case, this can easily become a huge issue for you, especially when it comes to balancing accounts and during tax time.
So, if you haven’t already, open up separate accounts and get a separate credit or debit card to reduce confusion and make things easier for yourself. This is one of the most important steps that will save you so much grief in the long run.
2. Open a Business Savings Account
Much like your personal finances, having a savings account can give you that extra peace of mind and more financial security. The aim is to allow yourself to focus on more important matters and not letting unexpected business expenses throw you off course. How to best approach this? The easiest way is to simply calculate a percentage of your income and then transfer it over to your savings at a set schedule.
This will help you during tax time and when unexpected costs arise, ensuring you are always prepared for any major expenses.
3. Automate Where You Can
Manual bookkeeping can be time-consuming and leaves a lot of room for error. While you may have competent math and organisation skills, it is easy for your bookkeeping to get in the way of other business tasks. Bookkeeping software can help you save time and stay on top of your expenses, helps with strategic planning, manage cash flow, perform financial analysis, and ensures greater accuracy during tax time.
Here are a few things to consider when choosing bookkeeping software:
- Factor in your needs and accounting skills.
- Keep your budget in mind. There’s no need to pay for features you won’t be using anyway.
- Ensure that the software can scale as your business grows, perhaps by upgrading to a different plan.
- Make sure that you can use the software both online and offline, downloaded to your computer or smartphone.
4. Perform Regular Financial Health Checks
Automated software can take away a lot of the manual bookkeeping labour, but it is still important to regularly check up on and keep track of your finances. Once a week or perhaps a fortnight, go over your books to ensure everything is in order and that you aren’t overdue with any invoices and payments. This will give you peace of mind and ensures your current bookkeeping methods are working for you. If you find that the numbers often don’t add up, you may need to reassess your bookkeeping processes.
5. Do a Quarterly Financial Review
At the end of each quarter, it is highly recommended to do a more in-depth checkup and review your bookkeeping records adequately. This means looking for trends to understand how your business is tracking, where you can improve and prepare for the future. Your local bookkeeper can assist you in understanding your business’s finances.
6. Keep Record of Business Expenses
What records should you actually be keeping track of? Your business expenses, for one, are important as they can come in handy, especially during tax time. For anything you are thinking of claiming, maintain a detailed record of the expense by digitizing receipts. Having a separate business credit card will also help with this process. The aim is to keep track of all expenses to save you time in the long run and ensure your finances are more accessible and easy to understand.
7. Monitor Your Employees Hours with Time Tracking Software
Cloud-based tracking software gives your employees the ability to clock in and out of work using their phones, reducing the need for you to track down messy spreadsheets and paperwork. Tracking software automatically records overtime, sick days, holidays and more, saving your employees and you as the business owner a lot of hassle. Different tracking software exists to suit various industries; work with your bookkeeper to find one that works with your bookkeeping software and payroll.
8. Pay Close Attention to Accounts Receivable
As an external factor that affects your business, accounts receivable are essential to stay on top of. If customers don’t pay on time, it can affect your cash flow. So encourage them to make payments on time.
It is vital to keep track of your finances and incoming payments so you can contact late-paying customers or send out a reminder. It can also help you with your customer relationships, as you may be able to offer them alternate payment plans to ensure loyalty rather than potentially losing a customer.
9. Stay on Top of Tax Deadlines
Tax periods can be stressful, but if you’re adequately prepared and stay on top of your finances throughout the year, you can rest easy knowing your business is on track to handle tax time without hiccups. It is always wise to plan ahead and put money aside for future tax bills. Planning also ensures you are aware of deadlines and pay on time to avoid any late fees.
TIP: You can often sync the Tax Calendar with your cloud-based bookkeeping software so you never miss a deadline.
10. Get Help From Shoebox Books
Consider hiring a professional, even if temporary, to help you set up and understand your bookkeeping process. Not only can your bookkeeper and accountant assist you in setting up a personalised bookkeeping strategy, but they can help you use it and ensure you are staying on track. While these tactics are simple on their own, juggling all these tasks as a small business can be difficult. That’s why your bookkeeping agent is here to help you learn to track your finances like a pro.
Getting professional advice on how to best implement these bookkeeping tactics in your small business can boost your success and save your time, allowing you to focus on other aspects of running your business. For comprehensive bookkeeping services, visit Shoebox Books, and contact our team of friendly professionals for more information.