When you are a small business owner, there are some vital things that are the backbone to your business…such as bookkeeping. When you bookkeep right, you understand your financial records and you can manage debits/deposits. Without proper bookkeeping of all of your business finances- you can easily end up bankrupt or in massive debt.
1) Keep notes of ALL of your financial records…and always back them up!
It is important to ensure that all of your financial documents that are used in day to day business transactions are well kept for future reference. This helps when you have to do taxes and it also establishes a good financial ground for your business when it potentially expands. Also, it is important to keep copies of your financial records- just incase if one goes missing or gets by accidentally destroyed.
2) Separate Receivable Payments from Borrowed Loans
Unfortunately one of the leading causes of business failure ise poor management of the company’s financials. Mixing of funds deposited by clients together with the funds that businesses have borrowed might lead to confusion and later turn into a financial crisis. Organization is key! Yalber advises to have the right bookkeeping software that allows you to keep records of income and borrowed funds separately for easy and quick follow-ups whenever needed.
3) Set aside weekly time to review your books
With reviewing your books on a weekly basis, it will help you keep updated about the state of our business. With doing this, you will be able to manage your cash flow and get to know your weekly expenses and be informed of your current invoices.
4) Don’t wait till the end of the year to talk to your accountant
Find a good advisor that you trust and make it a point to be in contact with your accountant regularly, not just at the end of the year. Doing so will make sure that if you have any bookkeeping issues, it will be caught in a timely manner…not at the last minute. Also this helps to know that you are in the right financial track with your business.
5) Understanding Debit and Credit
Yes, yes of course you know what debit and credits are. But its important to stress how essential it is to understand the notion of balancing when it comes towards the accounting of your bookkeeping. Every transaction your business makes, has a debit and credit. When you are using an accounting software, recording transactions are easy .But when you are doing this in Excel – it can be easy to make a mistake…make sure that you record both debit and credit.
Rule of Thumb:
A debit means:
- Increasing an asset or expense account; and
- Decreasing a liability, equity or income account.
Credit is the opposite. It means:
- Increasing a liability, equity or income account; and
Decreasing an asset or expense account.
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