On the road to building a viable business, certain things are not to be compromised. Your small business needs a robust foundation and a great deal of support to thrive.
The foundation is made up of important pillars such as a flexible workforce, a digitally-savvy marketing team, a knowledgeable IT desk, a business website hosted on servers with sufficient resources and featuring a domain name that communicates brand values, business insurance and a well-rounded leadership structure.
Equally important though, is a robust bookkeeping process. Regardless of how all the important fragments enumerated above line up, poor bookkeeping can hinder the business from making any progress. In worst case scenarios, the business will fail.
Profit tracking, cash flow and paying tax are important aspects of a business, and are the key reasons why you must keep an eye on your bookkeeping. A lot of businesses that fail do so because they overspend and don’t track their cash flow closely enough.
Sorting through receipts, invoices, taxes and other bills may seem like a lot of work in the early days. To help you stay in control of your bookkeeping, here are guides especially for you.
Create a system for proper documentation:
It is very important for you to always send out invoices and issue receipts when due. You need to also keep tabs on all the bills that you have to pay and be in control of your company’s finances.
The good news is that there is help to keep up; you can make use of tools like our online invoicing software right here on Cloudbooks.
Time to Organize:
No! It is not sensible for you to keep stashing those receipts together in a basket besides your desk as your business keeps expanding.
Make it easy on yourself by sorting the different documents out in files. Start by getting
a) A lever arch file
b) Plastic punched pockets
c) A set of dividers, labelled for each month
Religiously keep each document where it belongs- invoices, bank statements, employee expenses, phone bills and whatever other documents you use in your line of business.
You could also create an Excel sheet. it may seem like a lot to ask to do daily entry, but once you make the habit of making a record of every transaction, it becomes easier to keep track of all you do. Using software like the Microsoft Office 365 makes it even easier for you to enter data anywhere, on any of your device.
It will also save you a lot of mental stress to use an online document management services to help you keep your house in order. You may then customise the categories or use their pre-set categories as you file away.
Be careful how you handle your cash:
It is tempting to use the cash you have at hand for daily expenses. If the cash is from your business sales, ensure you remit it to your business bank account.
Aside from the discipline it gives you as a money manager, it makes it easy for you to also keep track of your sales.
It is absolutely imperative that you have a true record of your business ins and outs.
Separate your accounts
It is easy to muddle together personal expenses with business expenses, especially when you just start your business. It will save you a lot of stress to separate your finances by keeping your personal expenditures out of your business expenses. This is sure to save you a lot of trouble. To start with you need to have a separate account for your business. If you do not have separate accounts, then you should be disciplined enough to carefully highlight what you spend on your business and record it accordingly (in the appropriate journal or sheet) going through your bank records. Plan to get a business account as soon as possible.
If you keep separate accounts, then your work is partly done. You may, however, still find yourself drawing from your business account for personal use or using your personal funds for your business. The key thing here is to have a record of all these transactions. Beginner bookkeeping suggested making regular weekly or monthly drawings in the form of a wage/salary to meet personal needs, instead of withdrawing frequently or at random times, which makes it hard to keep track of the withdrawals being made.
You should also keep track of when personal funds are being used to fund business supplies or services. If you need to fund the business from personal money then consider it a loan to the business, and do it in a lump sum, rather than ad hoc.
Reconcile your accounts
Having a properly reconciled account is the ultimate goal in bookkeeping. Reconciling your account is when you compare two accounts and make sure they are in agreement. This is what you do when you compare your bank statements with the financial records you have been keeping.
It is important that there are no discrepancies between the numbers you have recorded and the ones from your bank statement.
If all this seems too much for you, there are lots of great tools and resources to facilitate and educate. Technology has made keeping the books easier than ever; so make use of it!