If you are a small businesses owner and looking to optimize your operations, this list of do's and don'ts on bookkeeping will help you save valuable time and money.
Let's look at the DON'Ts first and rectify them now:
Insisting to Do it on Your Own
Most small business owners and start-ups make this common mistake of maintaining the books of accounts all by themselves. Unless their core expertise is accounting, most entrepreneurs procrastinate this task and end up with a huge backlog at the end of each month. The motive to do it yourself may rightly be to have control over the way finances are managed and to avoid misappropriation, but remember, all these come at the expense of deviating your focus from core revenue generating business activities and losing valuable time, (it is estimated that average businesses spend around 20% of their time on bookkeeping). So, why lose out when you have better options like hiring a dedicated bookkeeper, automating, or outsourcing it.
Most small businesses get into this habit of not categorizing incomes and expenditures and end-up maintaining just one book for journal entries. This will lead to lack of clarity as to which business activity is turning out to be an overhead. For instance, if you are maintaining a separate ledger for bills receivable and you are regularly fighting bad debts then it shows inefficiency in your collection process.
Not Recording Small Expenses
Many petty expenses goes unnoticed or unrecorded, as we believe it makes no impact or the IRS is not bothered. These petty expenses over a period in time will pile up and create a big hole when you balance your accounts, these receipts if maintained may prove to be crucial while paying your taxes.
Just maintaining an Excel sheet
Start-ups and even small businesses feed all their entries in an Excel workbook as it makes things easier and avoids paper. But remember as your business grows so will this Excel sheet until it becomes an unmanageable monster.
DOs- Things to Do Right Now:
Reconcile with Your Bank Account
Miss this practice to find glaring differences when you finally tally your cash and bank books. This practice has to be followed every month or at least every quarter to avoid discrepancies that may prove fatal.
Use web based accounting applications that take care of your data backup. Not only can you access the system from anywhere, but also the system automatically takes care of data backup.
One vital role of bookkeeping is to track our business growth, but we seldom look at it that way. Bookkeeping should finally help us track our set financial objectives and correct us if we are going off-track. This is where financial reports come in handy.
Use of Software
This needs no introduction; most widely used accounting software QuickBooks is so efficient and reliable that it outsmarts a professional bookkeeper on all counts. It saves your time, money, generates all the financial reports needed for tracking your growth, and also comes with a plethora of features like, easy payroll system, imports your Excel reports, seamlessly integrates with your Microsoft Outlook, customer credit card protection, EDI, supports Linux and much more. Phew...that's a lot of stuff.
This is where the buzz is around; no one needs to be educated on the unavoidable benefits of outsourcing. Remember most small business owners are not professional bookkeepers and trying to be one is just wasting time, money, and resources. Outsourcing makes it easier, strictly professional and above all gives you the luxury of focusing on your core business activities. It is always wiser to rely on expert bookkeepers rather than being unprofessional with bookkeeping. You can outsource as little as an hour of bookkeeping work per day.
By Gourab Nanda
Image by Mihow
About the Author: A passionate Entrepreneur with a strong belief on Disruptive Technologies and Innovation. As the co-founder of MyBuisnessAssistant, I provide the strategic vision for the company. Prior to starting MyBusinessAssistant, worked for about nine years in business application integration using SAP. I have successfully led teams of IT and business professionals on various projects.We are a full service Virtual Business Assistance company for small and growing business. We provide a on-demand support platform (known as a Virtual Business Center), where you can pick and choose essential business services as per their business demand.