Top 19 Important Bookkeeping Tips for Small Businesses

By Kaleem Ulah

October 4, 2023

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Bookkeeping is definitely not your favourite task unless you are an accountant or enjoy working with numbers. However, developing strong habits early on might help you avoid costly mistakes in record-keeping.
As a small business owner, having a better hold on your money can help you set and achieve long-term goals. In this article, you will learn more about bookkeeping tips to follow that can help you smooth out seasonal fluctuations in your cash flow and even increase your profits.

What is bookkeeping?

Bookkeeping refers to the act of keeping track of and coordinating a company's financial activities. It is the most common way business owners use to determine whether or not their firm is profitable. Keeping track of your numbers allows you to identify potential financial concerns early on and discover answers before they become a full-fledged disaster. Bookkeeping also assists you in identifying potential for profit growth that you might not have recognised otherwise due to a lack of clean, easy-to-read financial records.

Why is bookkeeping important? 5 Important reasons

Effective bookkeeping serves as the bedrock upon which businesses build their success stories. In the following sections, we check out reasons every business owner should take bookkeeping seriously.

5 reasons why bookkeepìng matters infographic

We will list below eight of the most common problems with bookkeeping that small businesses experience. 

  1. Bookkeeping shows a business's financial health, enabling ideal decisions and plans.
  2. Financial data should be managed to facilitate tax preparation and eliminate errors, assuring tax compliance.
  3. Businesses may examine patterns, identify strengths and weaknesses, and develop growth strategies with detailed data.
  4. Transparency in well-maintained books builds credibility with investors, lenders, and partners.
  5. Bookkeeping is vital for legal compliance and avoiding penalties in many jurisdictions requiring precise financial records.

19 Game-Changing Bookkeeping Tips for Small Businesses!

As a business owner, you need tips and strategies to simplify your bookkeeping and make it easier. Below are important tips you can follow:

19 essential bookkeeping tips every small business should know infographic

1. Prepare for major expenses

Be mindful of the expenses that may arise in the next one to five years. Is it visible that your facilities will need to be upgraded? Is your office equipment nearing the end of its useful life? Understanding your company's seasonal ups and downs and how they will affect your capacity to spend during certain periods is critical. By forecasting large renovations or peak staffing expenditures, you can prevent moving money out of the company in good months and running out in slow months.

2. Find a good advisor

Bookkeeping is not a business aspect you should joke with if you want a successful business. A good financial advisor can help you with bookkeeping tips and keeping accurate and up-to-date records. The Kalculators, for instance, is one of the top bookkeeping firms in Adelaide, and they offer business advisory services to their clients. As a business owner, using The Kalculators service will boost your bookkeeping skills and improve your overall financial situation seamlessly.

3. Separate your personal and business finances

As a business owner, your income and other cash should be separated rather than dumped into one account. People want to avoid sitting down and going through every single shopping list or personal transaction to identify that one specific item of business. To keep things as easy as possible, open a fresh bank account for all your business needs.

4. Pay yourself a salary

You are the business owner; however, you still work for your company. Why shouldn’t you get paid just like every other employee? Getting paid by your business will lessen the need for businesses to pay your personal expenses directly, furthering the idea that your firm is a separate legal entity. Have the business write you one check each month that you deposit into a different account that is used to cover your costs, as opposed to multiple transactions throughout the month when the business pays an expense on your behalf.

5. Establish a streamlined record

If you own a small business, you are always looking for methods to improve the efficiency of your company's operations and streamline business processes. There are a lot of positive outcomes that can come from optimising the processes in your small business.
A strong correlation exists between streamlining operations in a small firm and increasing that business's overall efficiency. This is due to the fact that you will be able to get rid of any waste and inefficiencies that may have been there in the past. This has the potential to result in higher levels of production and earnings.

6. Create an audit trail

There is always a chance that you will be subject to a tax audit, no matter how careful you are with your accounts. You have an obligation to leave a paper trail that substantiates everything you've obtained, and your clients have paid for. An audit trail is a collection of documents proving the transactions recorded in your books are accurate. These records are meant to be kept in chronological order. Your audit trail can be useful in retracing your activities if you encounter any complications with tax mistakes, missing source documents, or missing transactions.

7. Monitor your cash flow

Cash is still king in 2023! Understanding the numbers improves your chances of running a successful business. Make a cash flow statement to keep track of your revenue and expenses. As a result, payment cycles and seasonal expenses are visible.
Some businesses prepare theirs frequently, while others prepare them periodically. Do what works best for your company, but keep a close eye on the cash flow. It frequently serves as an early warning mechanism for any prospective concerns.

8. Set money aside for taxes

You know you'll have to pay taxes, and you know when. So start saving money for it now. Unpaid taxes may result in penalties and interest from the ATO, so ensure the funds are there when needed. Putting money aside each month or when a contract is paid will be easier when the time comes.

9. Adopt cloud-based accounting and go paperless

We are in the 21st century, and there is absolutely no reason businesses should still be using paper. If you are guilty of this, it is time to go paperless. With cloud-based accounting software, you have 24/7 access to your company's financial data. Thanks to software integration tools, monthly paperwork, spreadsheet reviews, and hand calculations are now possible. The best choice is the one that simplifies your life the most; if you're still unsure, though, you can always see a bookkeeping professional for assistance.

10. Remember tax deadlines

Speaking of those tricky tax deadlines, do whatever it takes to remind you that the deadline is near. Reminders on your phone, a countdown—whatever. A nearing tax deadline might be stressful, especially if you're hurrying because you forgot, and any mistakes you make will take longer to process.
It's a very simple step. Make a note of the tax deadline, set a reminder ahead of time so you have enough time to complete your tax forms correctly, and the rest is easy. ATO will not investigate you; your records will be correct, and you may forget about it until the next deadline.

11. Opt for accounting software designed for your business type

When choosing software for your business, you must choose one that fits your needs. Looking at how your organisation functions and then carefully inventorying the various types of accounting software available is your best shot at selecting the proper software. A company with annual revenues in the millions will have substantially different accounting requirements than one with annual revenues of $50,000 or less. Many different accounting software packages are available, some of which are tailored to the needs of smaller and medium-sized businesses.

12. Make your books a priority

As a small business owner, it is easy to get distracted with the day-to-day operations of your company and forget about the books. Nevertheless, emphasising your books should be a top priority if you want to ensure your company's continued growth and maintain your financial stability.
Maintaining accurate and well-organised books should be a priority right from the start. If you continue to put off dealing with your books, you will soon find yourself buried under a mountain of your small business bookkeeping. Set aside some time to go through your books and bring them up to date to prevent a backlog of accounting work

13. Avoid Cash

Compared to dealing with various payment options, having a policy that only accepts cash is a simpler option for business owners. However, if you only accept cash payments, this could create additional worries and hassles for your organisation. Your business doesn’t need cash most of the time. Open a business account and use it for your monetary purposes.

14. Save all your receipts

We're not saying save and file every receipt after every transaction, but save any business-related purchase receipts so you can claim any company costs. It all depends on your business type; for example, you can claim back some of your domestic expenses if you work from home. It could range from stamps to stationery. Keep track of any business-related purchases or expenses and file them neatly in the previously specified records.

15. Send payment reminders

As a business owner, do not be scared to send payment reminders to your business partners who owe you business money. Always send it as a text message or an email, and ensure you give them time to come up with the receivables or an important excuse. Never think your consumer is intentionally trying to evade payment; give them enough time. If they continue to ignore your demands for payment, you can take legal action against them by sending collection letters demanding payment and providing supporting paperwork.

16. Analyse your reports quarterly

It is much simpler to carry out routine checks on your financial situation if you maintain accurate records of the cash that enters and leaves your possession. You can verify that all of your clients pay their invoices on time and prevent any gaps in your reporting if you use the appropriate accounting software. Even though it's a good idea to run checks monthly, you should also consider conducting a thorough audit of your accounting and bookkeeping records at the end of each quarter. When doing so, you should pay attention to patterns such as falling or expanding sales, significant expenses, or proof of customers who are paying late. You can better plan for improved cash flow in the future if you conduct an accurate analysis of your figures.

It is crucial for a business owner to be aware of the trends in the market so that they may make educated judgments regarding their products, services, and prices. If you pay attention to the trends in the industry, you will have a better understanding of what it is that your consumers want and need, which will allow you to alter your products appropriately.
You can make more informed decisions about your company if you can access reliable and up-to-date market trends data. You may use this data to understand the products and services in demand better, the prices your customers are willing to pay, and the direction your company should be moving.

18. Automate as much as possible

You should use accounting software to automate your accounting tasks to save time and effort. Thanks to software, you can ditch the spreadsheets and stop counting by hand. Consider aspects like data storage, ease of use, and safety while shopping for accounting software. Create a wishlist of essential features, pricing tiers, and reporting metrics that your company needs. Avoid making a hasty software purchase. Find out what kind of software would perform best for you and your company by doing some research.

19. Get help with the Kalculators

Many people attempt to handle their small business bookkeeping to save money. However, a lack of knowledge brings bigger problems to the business. The Kalculators, on the other hand, know what they're doing and will use their expertise, abilities, and experience to get your books in the best financial shape possible. You can rely on them to keep up with ever-changing laws and save time with professional bookkeeping services.

How Can The Kalculators Help Adelaide’s Small Businesses?

Are you ready to take charge of the financial success of your small business? The Kalculators provide customised solutions to help you simplify your bookkeeping process. Our skilled staff is always available to help you with every step of the process, from optimising tax strategies to ensuring compliance with Australian rules. Improve your company's performance with accurate data and effective financial management. Elevate your small business in Australia with our top-notch bookkeeping service.

Frequently Asked Questions:

What essential skills should a bookkeeper possess?

A good bookkeeper needs many talents to manage financial records and support a business's finances. Firstly, strong arithmetic and mathematical skills are essential. Bookkeepers must be accurate and detail-oriented to avoid financial disparities because they work with numbers, calculations, and financial data.
Organisational abilities matter too. Bookkeepers track many transactions, invoices, receipts, and other paperwork. Organising and categorising these documents provides quick retrieval and a clear financial picture of a corporation.
Modern bookkeeping relies on accounting software and tools; thus, technological skills are also crucial. To properly input, analyse, and report financial data, bookkeepers should be experienced with these technologies.
In conclusion, a good bookkeeper uses numerical accuracy, organisational skills, attention to detail, technology expertise, communication skills, and ethical integrity to assure accurate financial record-keeping and help a firm succeed.

How can I do bookkeeping effectively?

Keeping good books requires planning and attention to detail. Make a well-organised method for filing invoices, receipts, and bank statements. Keep good records and sort your purchases often. Use accounting tools to do maths and enter data automatically. Make sure your accounts and financial records match up by looking at them often.
Furthermore, bookkeeping should be done at set times, once a week or once a month. Review financial reports regularly to figure out how well your business is doing financially and to make good choices. Talk to a good bookkeeper to make sure everything is correct and legal.
Collaboration and clear team communication are very important. Keep the lines of communication open with the right teams to record all transactions and handle problems quickly. You can keep track of your books and help your business's finances by sticking to a plan, using technology, and paying attention to your financial records.

What are some common bookkeeping mistakes?

Even fairly common bookkeeping mistakes can greatly affect a company's finances. People often make the mistake of putting costs in the wrong group. When costs aren't put in the right category, it can mess up financial reports and tax calculations, leading to wrong conclusions and even legal trouble. Another common mistake is to forget to do regular account reconciliations. If your recorded actions don't match your bank statements, you might not notice mistakes like missed payments or incorrect balances.
If reconciliations aren't done correctly, it could slow the decision-making process and make it hard to know how the organisation's finances stand. Implementing strict record-keeping methods, using technology to improve accuracy, and contacting professionals regularly to ensure compliance and accuracy in financial management are all good ways to reduce the chances of making these kinds of mistakes.

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About the Author / By Kaleem Ulah

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Kaleem is CEO & Author at "The Kalculators". With more than 10 years of experience in financial services, He built Kalculators to transform your financial challenges into strategic triumphs!

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