January 22, 2016
We recently talked about what to do if you’re starting a new business this year. Another consideration that should be on your list is bookkeeping. Even if you’ve been in business for awhile, everyone could use a little advice when it comes to handling the money. Here are some basic bookkeeping tips:
Use the right system – The two basic accounting systems are the cash method and the accrual method. According to Score.org, “The cash method means you count cash when you receive it and expenses when you pay them, and the accrual method means you count income and expenses when they happen, not when you actually receive or pay them.” The cash method is simpler and works for many businesses, but the accrual method may be better if you keep inventory on hand or do a lot of transactions using credit. It’s best to check with the IRS in those instances to see what’s required.
Choose software – It goes without saying in this day and age, but using bookkeeping software makes everything so much simpler, from tracking income and expenses, to preparing tax documents, to backing up records, and more. Even the smallest of businesses can benefit from the right bookkeeping software.
Maintain daily records – Once you have your accounting system sorted out and your bookkeeping software set up, now it’s on you to maintain daily, accurate records. In just a few minutes, you can record what happens every day so that you can track the overall financial condition of your business.
Leave a trail – Hand-in-hand with daily record-keeping is leaving an audit trail. Your bookkeeping system should include a way to retrace your financial steps. This means keeping invoices and checks in numeric order and not skipping around, as well as setting up separate bank accounts for business and personal funds. An effective audit trail will allow you to go back over a year and see a clear financial footprint of your business.
Handle checks carefully – And while we’re talking about being careful, the same tip applies to handling and reviewing checks. At the end of the day, checks are cash, so take care to sign checks with a distinctive (but clear) signature that will discourage forgery, review cancelled checks right away to catch unauthorized checks, and in the case of a partnership, have at least one of the partners co-sign the checks.
Synchronize bank statements – Another basic thing to do that can really save you headaches is to synchronize your bank statements with other monthly records. You’ll be able to more easily reconcile those statements and track expenses.
Bonus: Plan for major expenses – The experts at Entrepreneur.com recommend putting a major expense like a computer upgrade on your calendar a year in advance, and ideally three to five years. Why? Because you’ll be able to financially plan for the event and adjust through seasonal ups and downs, which means you’ll be better prepared—and less likely to have to take out a loan—when the expense becomes urgent.
If you’re a business owner looking for bookkeeping services in Denver, contact the experts at Bloch, Rothman & Associates. We’ll help you track what’s owed to you, prepare invoices and statements, project your cash flow, and much more. Give us a call today at 303-321-7160.