24 May 2023
Bookkeeping might not be the most exciting part of running your small business, but it is an absolutely essential task that undoubtedly plays a big role in your financial success. Bad bookkeeping can lead to a myriad of problems down the line, such as missing out on tax deductions or having to pay unexpected penalties. Meanwhile, great bookkeeping helps you to maintain control and visibility of your finances, plan for the future, and make accurate decisions.
What is Bookkeeping?
Bookkeeping is the process of tracking and recording all your financial transactions and is the foundation for all your accounting tasks. The end goal of any bookkeeping system is to have accurate financial records that you can use to make informed decisions.
Bookkeeping Terms to Know
Accounts Payable
Accounts payable are the amounts of money that you owe to vendors and suppliers. This typically includes things like the bills from the website hosting service or your office supplies provider.
Accounts Receivable
Accounts receivable are the amounts of money that your customers owe you. This includes things like customer invoices, deposits, and payments towards services or products that you provide.
Assets
Assets are the items that your business owns. This includes physical assets such as computers, furniture, or vehicles, as well as intangible assets like intellectual property or software.
Balance Sheet
A balance sheet is a financial statement that summarizes the assets, liabilities, and equity of your business.
Cost of Goods Sold
The cost of goods sold (COGS) are the direct costs associated with producing goods or services, such as materials and labor.
Expenses
Expenses are the costs incurred in order to run your business, such as rent, office supplies, salary, or advertising.
Equity
Equity is the amount of money that your business has earned through profit or reinvestment.
Liabilities
Liabilities are debt that your business has taken on, such as loans, credit card balances, or lease payments.
General Ledger
The general ledger is the main record of your financial transactions, and it serves as a master account book for your business. It includes all accounts for your income, expenses, assets, liabilities, and equity.
Journals
Journals are used to record financial transactions in chronological order. These include cash disbursement journals, accounts payable journals, and accounts receivable journals.
Reconciliation
Reconciliation is the process of making sure that your financial records are accurate and up-to-date. This involves reviewing transactions, statements, and other documents to verify that they match up.
Revenues
Revenues are the income that your business earns from sales, services, or other activities.
Payroll
Payroll is the process of calculating and distributing wages to your employees.
How to Get Your Bookkeeping Right
Now that we’ve established some basic bookkeeping terms that you need to know, let’s turn our attention to the actual process of getting your bookkeeping right. Here are some tips to help you get started.
1. Choose the Right Bookkeeping Software
There are plenty of great cloud software solutions and apps that make bookkeeping easier. Choosing the right one for your business will depend on a few key factors such as budget, features, and ease of use.
2. Set Up a Separate Business Bank Account
If you’re using the same bank account for your business and personal transactions, or two businesses at once, that’s a surefire way to make your bookkeeping far more complicated and frustrating than it needs to be. Setting up a separate bank account for your business will help you to keep everything organized and make tracking expenses much easier.
3. Automate as Much as Possible
Having chosen the right bookkeeping software, it’s important to take full advantage of its features. Look for ways to automate tasks like recurring bill payments, credit card charges, and customer invoices. Automating these processes can save you a lot of time and effort.
4. Stay on Top of Your Records
Bookkeeping is an ongoing process, so it’s important to stay on top of your records. Make sure to update your accounts regularly, reconcile discrepancies in your bank statements, and review any invoices or receipts.
5. Create a Process for Document Management
Accurate bookkeeping requires that you keep up with all of your incoming and outgoing documents. Creating a process for document management will help you stay organized and make filing your taxes easier.
6. Budget for Taxes
One big mistake that many new business owners in particular tend to make is failing to budget for taxes. Set aside some money each month so that when tax season comes, you won’t be caught by surprise.
7. Daily Records
A little-and-often approach to bookkeeping is the best way to ensure that you stay on top of your records. Make sure to keep a daily record of all transactions and reconcile your accounts weekly.
8. Track Expenses Carefully
Having a clear record of all your expenses can help you to identify any potential problems or areas for improvement in the future. Take some time each month to review and categorize all your expenses.
Conclusion
Bookkeeping is an essential part of running any business, and it’s important to stay on top of it by taking the time to understand the basics and setting up a system that works for you. With the right tools and processes in place, bookkeeping can be manageable and empower you to make smarter decisions, creating a stronger and more financially solid business.
Book a free consultation here, to learn more about how our bookkeeping services can support you.
31 Mar 2023
Bookkeeping is essential for tracking and understanding your business’s financial performance. It helps you better understand where your money is coming from and where it’s going, and empowers you to make informed decisions that will help your business succeed. It also helps you stay compliant with tax laws, manage budgets, and make better decisions about how to allocate resources.
Let’s take a deeper dive into how bookkeeping can be beneficial for your business.
1. Better Budgeting
Bookkeeping can help you create and manage accurate budgets. It allows you to assess how much money is coming in from customers, expenses, and other sources, and gives you a better understanding of where your business stands financially. With this information, you can create more effective budget plans that will help you jettison your business to success.
2. Accurate Financial Reports
Bookkeeping allows you to easily generate accurate financial reports that give you a better understanding of your business’s financial performance. This information can then be used to make more informed decisions about how to allocate resources, spot financial trends, and identify areas where you can save money.
3. Tax Compliance and Savings
Bookkeeping helps you ensure that you are in compliance with tax laws by providing accurate financial information. This allows you to avoid costly mistakes and potential penalties from the IRS and other regulatory agencies. Additionally, bookkeeping can help you save money by enabling you to take advantage of deductions and other tax benefits that apply to your specific business.
4. Cash Flow Management
Bookkeeping also helps you manage your cash flow more effectively. With accurate records of expenses and income, you can better plan for cash flow needs and avoid potential problems such as overdrafts or insufficient funds. This will help you make sure that your business has the money it needs to succeed.
5. Confidence
One key benefit of bookkeeping is that it can give you peace of mind. Knowing exactly where your business stands financially will give you the confidence to take risks and make decisions that will help your business grow and succeed.
6. Setting Targets and Goals
It’s difficult to set specific goals when you have no idea what your numbers are, but bookkeeping can help you identify your current financial performance and help you come up with realistic targets to strive towards. You’ll also be able to accurately measure your progress along the way because you’ll have the data you need to track your progress.
7. Organised Records
Unorganised records are a ticking time bomb. Bookkeeping helps your business by keeping records organised and up to date, enabling you to quickly access the financial information you need when you need it. This makes it easier to answer questions, identify trends, and make decisions that will help your business succeed.
If you let your records become too chaotic, you can be sure that your business won’t reach its potential. That’s why bookkeeping is so essential to the success of any business. With accurate and up-to-date financial information, you’ll be able to make better decisions and take advantage of every opportunity that comes your way.
Final Thoughts
As you can see, bookkeeping is an essential component of a successful business. It can help you stay compliant, manage budgets, and make better decisions. With accurate financial records, you’ll be able to take your business to the next level.
If you need help getting your bookkeeping in order, consider working with us to ensure accuracy and consistent record-keeping. With the right help and strategies in place, you can be sure that your business will be on its way to success. Book a free consultation here.
11 Jan 2023
Are you a small business owner? If so, then you know how important it is to keep your finances in order. After all, your business’s success depends on it.
But what you may not realize is that your accounting also has a huge impact on the fate of your enterprise.
Good accounting is essential for small businesses in order to make sound financial decisions, track progress, and plan for the future. It also helps you to save money and avoid costly mistakes.
Let’s take a more in depth look at why getting your accounting right is essential for small business success.
#1 – Financial Stability
The first and most important reason why good accounting is essential for small businesses is financial stability.
Without accurate financial statements, it’s impossible to know how much money your business is making or losing. This information is crucial for making sound financial decisions and ensuring that your business is on track.
If you don’t know which direction your business is going in, you’ll quickly crash and burn.
#2 – Greater Efficiency
Another reason good accounting is essential for small businesses is that it can help you run your business more efficiently.
With accurate financial statements, you can track your spending and better manage your cash flow. This information is crucial for making sure that your business has the funds it needs to operate smoothly.
Good accounting can also help you find areas where your business is wasting money so that you can cut costs and improve your bottom line.
Not only this, but your accountant can help you to identify your most valuable customers or clients and target them with your marketing efforts. This can lead to improved customer retention, more sales and ultimately a leaner business model.
#3 – Peace of Mind
Running a small business can be stressful, and there are many things you need to keep a close eye on.
Good accounting can help take some of the stress out of running your business by giving you the peace of mind that comes with knowing your finances are in order.
Don’t underestimate the importance of a strong mindset in running a successful small business. When you’re not worried about your finances, you can focus on other aspects of your business and make better decisions overall.
#4 – Better Decision Making
Finally, good accounting is essential for small businesses because it gives you the clarity you need to make informed decisions about your business.
With accurate financial statements, you can see where your business is succeeding and where it needs improvement. This information is crucial for making sound strategic decisions about the future of your business.
Good accounting can help you avoid costly mistakes and make smart decisions that will help your business grow.
In fact, good accounting is absolutely essential when preparing for business growth because it gives you the information you need to make informed decisions about investing, hiring, and expansion.
Growth often requires you to spend more than you’re bringing in, and good accounting can help you plan for this so that you don’t put your business at risk. The right accountant or advisor will help you to properly manage your cash flow and make accurate predictions so that you can grow your business at a steady, sustainable and successful rate.
Final Thoughts
Small business owners should not underestimate the role of great accounting in the success of their business.
Accurate financial statements and careful record keeping are crucial for making sound financial decisions, tracking progress, and planning for the future.
More than that, knowing that your accounts are in order offers peace of mind and allows you to make timely and profitable decisions with clarity and confidence.
Remember, running a business should ultimately be enjoyable, and it’s very difficult to achieve this goal when finances are a constant source of stress. Investing in a quality accountant to help you relieve this burden might just be the best business decision you’ll ever make.
Book a free consultation here, to discuss your needs and learn how we can assist you.
21 Oct 2021
The problem with accounting is that even the smallest of mistakes can eventually compound and become a giant problem. In fact, it usually takes far more time to correct an accounting error than to get it right in the first place. With that in mind, we’ve put together a list of the six most common accounting mistakes for small business owners to avoid.
- Failing to Create a Business Budget
As a business owner, it’s your job to steer your company towards profitability and this is very difficult to do without a budget to keep your bottom line in check. Creating and regularly reviewing a business budget reduces overspending, helps to create realistic financial goals and provides a benchmark against which to measure your progress. It essentially functions as a roadmap. Without it, you may soon find yourself lost.
- Ignoring Accounting Procedures
It may not be your idea of fun, but it’s important to set up formal procedures for managing accounting and bookkeeping tasks within your business. It’s a good idea to create standardised forms to ensure consistency across the board. This will ensure that your information stays accurate and avoid problematic gaps in your records later on.
- Missing Data Entry Errors
In an ideal world, there would be no data entry errors to miss in the first place. Unfortunately, as it is, it’s impossible to completely prevent data entry mistakes. What you can do, however, is perform reconciliations regularly so that you catch said errors as quickly as possible, before they start to cause bigger problems. Make a habit of reviewing unusual transactions, too.
- The DIY Approach
As a business owner, you wear many hats and it’s only natural to want to do everything yourself but this approach is neither profitable nor sustainable. Your time is an important resource, so wasting it on low-value tasks that you could easily outsource is not conducive to business growth. Outsourcing these tasks will free up your time and allow you to focus on generating more revenue. Furthermore, it’s often prudent to outsource to those with more expertise than you. Tax accountants, for example, undergo years of training and are far better versed in the intricacies of tax law than you are. Therefore, outsourcing tax planning and preparation is a very smart move for the financial health of your small business.
- Not Backing Up Accounting Software
Ask any IT expert and they’ll tell you that backups are essential; you never know when disaster could strike. Backing up your data could save you a huge amount of time and money in the event that your data is lost or corrupted. Fortunately, many cloud accounting programs allow you to create automatic backups at regular intervals. You should also double-check your backup files regularly to ensure that they are in good working order.
- Shoebox Accounting
If your small business has more than a few small transactions each year, then the shoebox accounting method is a very bad idea. It’s important to stay on top of your accounts and keep a careful track of all of the funds that enter and leave your business throughout the year. Fail to do so, and submitting your tax return will be a nightmare. You may even end up paying more than you need to. Investing in accounting software and seeking the help of a professional accountant are smart moves that will greatly improve the financial health of your business.
Summary: Think Long Term
Business is a long game and it’s important to retain this mentality when it comes to accounting, too. It pays to be prepared and plan ahead; shoebox accounting and leaving things until the last minute will only land you in hot water. By avoiding the above six accounting mistakes, you can save your business both time and money, and get back to focusing on growth.
21 Jul 2021
Choosing a great accountant is one of the best investments you can make for your business. A quality accountant can do much more than save you money on your tax bill – although of course, that’s important too. A professional accountant is a strategic business partner who can provide shrewd insight into your financial situation and offer valuable advice that will guide you towards success. They will serve as an advisor who can help you reduce tax liability, create business strategies, drastically improve your cash flow management and highlight growth opportunities that you may be missing. So how do you go about finding the best accountant possible for your business? We’ve put together a guide to make things easier.
Internal vs External
Many small businesses opt for an external accountant which gives them access to expert support and guidance, without the costs of hiring a full-time employee. Another perk of hiring an external accountant is that you can scale their services as your business needs grow and change. However, it may be worth considering an in-house accountant if your transactions are extremely large and complex as this could prove to be a more cost-effective choice.
Consider Going Virtual
Nowadays, thanks to the popularity of cloud based accounting software it’s no longer necessary to hire an accountant based on their proximity to you. It’s also entirely possible to remotely maintain a personal relationship with your client thanks to video conferencing software. This gives you more freedom to choose your accountant based on quality rather than location.
Industry Experience
Consider your prospective accountant’s speciality before hiring them. It’s worth hiring an accountant with relevant industry experience because they will have a detailed knowledge of the market and your specific business needs. They will also be able to use their acumen to avoid common problems and pitfalls within your industry and employ proven systems to do so.
Personalised Service
One of the many drawbacks of cheap accountants is that they serve thousands of clients at once, so you don’t receive the benefits of a personalised service. You’ll be lucky if they remember your name, let alone go the extra mile to meet the specific needs of your business! As a business owner, you have specific concerns, pain points and aspirations. You need an accountant who not only understands these, but works hard to find solutions. Look for an accountant who is keen to have a conversation to learn more about your needs and then tailor their services to suit your requirements. Accounting is not a one-size-fits-all approach and a high quality accountant understands that.
Prepare Questions
Of course, you’ll want to talk to your future accountant before hiring them. It’s a good idea to make a list of what’s most important to you and prepare questions accordingly. A quality accountant will function as a business partner and mentor, and therefore it’s important that you find the right fit. As well as basic questions like price, certifications, software and services, think about:
- What is their idea of a positive client relationship?
- How can they help you to grow your business?
- How often should you be in touch?
- What are some special considerations for your specific industry or business model?
Summary
Overall, a great accountant is someone with whom you can completely trust with your financials. As well as the above considerations, it’s vital that you listen to your gut when seeking a high quality accountant. This is an important investment in the financial health of your business that should not be taken lightly. Many business owners see accountants as number-crunchers, but the truth is that a successful relationship with your accountant will be a personal one, too. Your accountant will be a partner and guide, so you must establish a healthy and trusting relationship. When this is the case, the money you spend will be a drop in the ocean compared to the money you save and generate thanks to their services.
3 May 2021
There’s so much to think about when running a small business and you can’t do it alone forever. For one thing, handling the financial side of your business is a full time job in itself and you really can’t afford to take your foot off of the gas for any length of time. Without external help, it’s all too easy to lose control of your finances and this can prove disastrous.
Many small businesses put off hiring an accountant for a later date, but in actual fact it pays to do this sooner rather than later. Your business is most likely to fail in its early days, and during this time any unnoticed accounting or bookkeeping errors could compound and devastate your budding enterprise.
A good accountant truly is an investment in the financial health of your business, both now and in the future. Of course, every business owner has a unique set of needs and circumstances, so here’s how to tell if it’s time for you to hire an accountant and get back to doing what you do best.
1. You’ve Made Mistakes Before
It’s no secret that accounting isn’t exactly simple. Innocent oversights and slight miscalculations are all too easy to make, but difficult to undo if they go unnoticed for too long. If you’ve made accounting or bookkeeping errors in the past then you’ll already know just how much time and effort is required to rectify them. Furthermore, mistakes on your tax return could result in huge fines. If you’re struggling to manage your accounts and keep accurate records, then it’s definitely time to seek help before these mistakes damage the financial health of your business or halt your growth.
2. You’re Short on Time
Running a business is time-consuming and there are always a hundred and one issues demanding your attention. With everything else going on, it can be difficult to find time to balance the books and ensure you’re on top of your finances. However, it’s really important to do this in order to maintain accurate records for tax returns, credit applications and financial planning. If you don’t have time to look after your finances, you need to seek the help of a professional accountant who can.
3. You’ve Got an Audit Coming Up
If an audit is looming, you may be in for some sleepless nights. It’s important to make the process as smooth as possible, so your accounts and records need to be squeaky clean and perfectly organised. Otherwise, you’ll be facing a barrage of work trying to straighten things out. Furthermore, any innocent mistakes you’ve missed could result in a hefty fine. Therefore, it’s worth enlisting the help of a quality accountant who can get your affairs in order, find and fix any mistakes you’ve made and ensure that you pass your audit with flying colors. It will save you money not just in fines, but potentially in therapy fees, too.
4. Your Business is Growing
As mentioned, it’s never too early to hire the help of a professional accountant but when your business is going rapidly, it’s most definitely time to give up the DIY approach.
Rapid growth means new customers, new hires, more investment opportunities and many more demands on your time. However, this is certainly not the time to overlook your accounts. Hiring an accountant can help you to choose potential investors wisely, manage your cash flow and use your extra income wisely.
As your business grows, new financial challenges will arise and it’s best to have an expert on hand to deal with them when they do. Growth is fantastic, but it can lead to instability and the right accountant can help to keep your business on the path to financial success. Summary If your business ticks any of the above boxes, it’s time to invest in an accountant to protect and improve the financial health of your business. Chartered accountants train for many years in order to receive their qualifications, so don’t make the mistake of thinking you can manage your small business’ accounts by yourself forever. In order to create a successful business, you need to treat it like business, and that means taking your finances seriously and investing in the financial health of your organisation.
