Bookkeeping is essential for all businesses, and at times for individual people too. Put simply, bookkeeping is keeping a record of what money comes in or goes out on each day. As well as the amount and whether it’s earned or spent, a record of how it’s earned or spent should also be kept. It’s a good idea to keep receipts for all of these transactions too, just in case there is any dispute about the transaction itself.
All of your bookkeeping info will be used for things like end of year statements, and tax returns. It also lets you see how much is spent, and on what, as well as how much is earned and how. Now let’s take a look at some tips to help simplify your bookkeeping.
- Keep a Separate, Specific Account & Card for Business Use
This helps a lot with keeping track of expenses when it comes to tax time. The advantage of a separate account for these expenses is that you can see at a glance exactly what is a business expense, as this account and card are only used for business expenses. This helps you to remember things that might otherwise be forgotten, like business coffee or lunch meetings, and smaller expenses like stationary.
Income going into this account also helps keep it away from your personal funds, and stops you from accidentally spending money that should be kept aside for other things. It also splits your income away from your personal savings and salary.
- Make Note of Important Dates
This is a simple one that can sometimes still be forgotten. Make note of important dates so you know when they’re coming and have time to prepare. It might be something like performing system upgrades or annual checks. These things can then be accounted for in advance on the books if there’s an expense associated, so you can budget ahead of time. Income that you expect, say at the end of a contract, or that is paid quarterly/annually should also be noted. With income, it’s a bit less about accounting in advance, as you should always wait until you have been paid, and more about remembering to collect or at least check payment has been made.
Other important dates include tax deadlines. This allows you to plan ahead for taxes, and also gives you time to prepare when the date is approaching, so there’s no need to rush and you don’t risk a late payment, which can cost you even more.
- Keep Systems in Place
You should have systems in place for issues like late or non-payment, both in terms of collecting the payment and any fees/interest, and also in terms of how you will get by in these situations. There can also be systems for how you will deal with other possible issues, like late stock delivery or unexpected expenses. An example system for unexpected expenses can be as simple as putting a small percentage of income away for emergencies and maintaining this fund at a set threshold.
- Stay on Top of Your Bookkeeping
The easiest way to ensure your books are always up to date is to do it regularly. This can be a little time set aside for the task each week, or an even smaller amount if you spread it out and do it daily. Reviewing the numbers can also be done at the end of a week or month to make sure things are working properly. Regular record keeping also helps to prevent mistakes and gives you early warning if something is wrong with the numbers.
- Use an Accounting System
If you do your own books, find a way to keep records that is comfortable for you, whether it’s using actual ledgers, basic spreadsheets or an accounting program. This stops things getting messy and keeps everything consistent and easy to access. It’s also a good idea to keep backups, and digital bookkeeping is easier to back up and keep track of than physical bookkeeping. It’s also usually quicker, outside of any time needed to first learn the software.
- Keep Receipts for All Business Expenses
Some businesses are legally required to keep receipts so they can prove business expenses. Even if this doesn’t apply to you, you should keep them anyway as it helps prove your expenses and also to keep track of what you have spent on. Keeping a separate stack for personal expenses can also help with your personal bookkeeping, as you can see if you’re spending more in certain areas than you have budgeted for, and stay on top of your finances.
- Avoid Cash
If you can avoid cash it helps to keep a much better record of your income and expenses, as they will all also be recorded on the account statements. If you do this be sure to still keep receipts, they might still be needed at some point. Bank statements do help to keep your bookkeeping record very straight forward though.
All of the above tips can help you to simplify your bookkeeping and make this area of your life a lot simpler. It’s still good to always at least consult with a bookkeeping specialist at times, to make sure everything is working as it should. There can be a lot more detail involved with making sure it’s all done in the best possible way, and it’s often a very small investment to get help when not much time is needed.
Also remember to consult if in doubt at any point. Getting it wrong with your finances is never going to have good consequences, so stay on top of it at all times.