Bookkeeping Basics for Small Business Owners
On average, small business owners spend 10 hours each week recording, organising, and processing financial transactions – everything from accounts receivable and payable to payroll, expense receipts and supplier invoices.
While the process may be time-consuming (and tedious!), effective bookkeeping is the foundation of sound financial management – which in turn, is the lifeblood of your business.
Feeling overwhelmed by mountains of paperwork and complex calculations? Here are three bookkeeping basics to help ensure a healthy financial future for your small business.
Faithfully track expenses
Accurate and consistent expense tracking is crucial for claiming tax deductions and lowering your overall tax bill. Plus, analysing expenses can offer crucial insights into spending patterns and the overall profitability of your small business.
Small business owners should consider using a mobile app for simple, consistent expense tracking. Options like Receipt Bank and HubDoc help do away with manual data entry with automated functions, including:
- Receipt data capture via your smartphone’s camera (no need to hold onto paper receipts, which can get lost or misfiled);
- Synchronisation with your phone’s GPS to track kilometres of business travel; and
- Importing bank and credit card data; and
- Integration with accounting software.
Systematic invoicing and filing
Efficient invoicing is about more than ensuring you get paid in a timely fashion. An invoice is an official record of the terms of each transaction and must be completed accurately to avoid errors in your bookkeeping process.
Here are a few tips for professional invoicing:
- Ensure each invoice includes all the important details: contact information, an invoice number, a detailed list of products or services rendered, and a breakdown of the total amount due;
- Ensure you apply GST rulings correctly; and
- Maintain an invoice-filing system that records when you sent the invoice, to whom, when payment was made, and any reminders sent out.
An online invoicing tool can streamline this aspect of your bookkeeping process and provide an efficient backup filing system.
Save time with accounting software
By law, every business is required to keep organised and timely financial records. However, manually posting income and expenses to ledgers and journals is time-consuming – not to mention stressful for the math-averse.
Shave some time (and stress) off your weekly bookkeeping with an all-in-one accounting software solution like MYOB, Xero, or QuickBooks.
Online bookkeeping offers numerous advantages, such as:
- Instant reports and real-time insights on profits and loss, customer accounts, payroll – and your overall financial “big picture”;
- Simplified data entry so you can collate and print invoices, purchase orders, and payroll much faster than with manual methods; and
- Improved accuracy through automation (once data is entered, the software handles all subsequent calculations and processes – including invoicing).
When it comes to accounting, vigilance is the key to mitigating risk and ensuring the long-term profitability of your small business. Be sure to set aside time each day, week, and month to update and review your books to catch any red flags and ensure your finances are on track and you are able to meet all your compliance tasks efficiently and on time.