2023 is expected to throw businesses some curve balls. So it is imperative that we stay one step ahead of what’s to come to prepare for financial challenges. You may not have done a great job with your bookkeeping last year, but not to worry, nothing like a new year to kick things off right. It’s a fresh start and the perfect time to reflect on the past, set goals and figure out how to meet them.
Here are a few bookkeeping tips to kick things off with a bang, get your books in order and keep it that way for the rest of the year.
Tip 1: Create a Budget
In creating the budget, you determine how you plan to acquire and use your resources to meet the business’ objectives. Once in place, it becomes a valuable benchmark to determine how well the steps taken by management are ensuring objectives are attained. Used correctly, a budget is the map of the company’s strategic plan.
Tip 2: Maintain Daily Records
Commit to doing a little bookkeeping each day. If you can’t find time to do a little every day, how will you find the time at the end of the year? Your bookkeeping system doesn’t need to be sophisticated. Whether you are using a spreadsheet or accounting software, the important thing is that you are maintaining a daily record of your operations.
Tip 3: Have a Storage System
Keep all records for one year together. This should include the tax return for the year, bank statements, cancelled checks, paid bills, financial statements and any other backup files which support your revenue and expenses to provide to your bookkeeper or should the authorities ask to review your books. We recommend you scan or take a picture of all receipts as some of them may fade after a while.
Tip 4: Keep Separate Accounts
Have a separate bank account and credit card for your business. Tracking your business performance is dramatically simpler if you are not wading through a sea of unrelated expenses. This does not need to be a complicated process. If you already have a bank account that is not being used, you can designate that account as your “business” account, using it to deposit income and pay of business-related expenses charged to your credit card. Not only will you be able to track expenses more efficiently, but, if you want to access a loan or the tax authorities want to review your books; you will only need to provide access to a single account.
Tip 5: Review Monthly Bank/Credit Card Statements
You will either get these in the mail or you can access them online via your banking portal. Make a habit of reviewing these on a monthly basis before passing them to your bookkeeper, to ensure that the relevant revenue or expenses (including bank charges and other fees) that are on these statements have also been accurately accounted for. This prevents overstating income or understating expenses due to unauthorized or personal use of a bank account and/or credit card.
Tip 6: Stay on Top of Your Receivables
Cash is king. The longer a customer takes to settle an invoice the harder the impact on your cash flow. Develop an efficient system to track overdue invoices. Send a polite and friendly e-mail 1-3 days after sending the invoice to confirm receipt. Follow up with a reminder 2 to 3 days prior to and after the due date. By being polite, but firm, you’ll likely increase your odds of collecting the cash and retaining the customer.
Tip 7: Set Up a Petty Cash Box
Frequent small purchases can add up to big expenses. However, by losing track of the smaller purchases, you could be losing potential tax deductions. Rather than personally paying for these smaller purchases and misplacing the receipt, create a petty cash fund. Keep the value of the box at the starting amount, when a small item needs to be purchased, use the money from the petty cash box and replace the money with the receipt. Continue to replenish the funds from the business’ bank or cash account.
Tip 8: Review and React
Keeping your books up to date and organized is great, but on its own won’t help your business. You must periodically review those financial reports and use them to make decisions. Did you hit your quarterly sales targets? Are you close to exceeding your budget? Is your profit on track for the year? Be prepared to adjust your spending or tweak your business strategy. In short, try to understand the story your financial reports are telling and be prepared to react accordingly.
Tip 9: Know your limitations – Outsource Accounting Function
Getting organised is no easy task, especially when it is not your area of expertise. So of course, if any of these resolutions seem daunting, or simply too time-consuming, you should consider engaging a professional. This can increase business efficiency and free up time to focus on your business growth. A consultation with an accountant can help you to understand your specific accounting and tax needs as well as advise you on what to track and when.
Serika Sterling is a Certified Public Accountant (CPA) and Owner/Manager at Senior Accounting Services, contact her at info@sasjm.com
