Studies show that most business owners view accounting as the most important and challenging aspect of their business.
As a small business owner, staying on top of your financial data can mean paying the right amount of taxes and maximizing your yearly profits.
It also means understanding how corporate finances work and maybe even outsourcing bookkeeping services.
Whatever the case, it is possible to keep those books in a way that optimizes your sanity and success!
Read on for more insight into tips you can keep in mind for easy bookkeeping.
1. Invest in a System That Works
Effective and easy bookkeeping depends on a reliable system. In this digital age, small businesses should invest in bookkeeping software that suits their needs.
It can be difficult navigating the world of bookkeeping software for the first time, especially if you are just starting out as a business. A lot of business owners are wary of fronting too much money up front on business items.
However, it is possible to set up your own bookkeeping records in Microsoft Excel. You can also download some bookkeeping software for free or sign up for free trials of competitive software systems.
Try your hand at online software too, or if you can afford to make the financial leap, check out Quickbooks. These software programs can make for incredibly easy bookkeeping given their ability to generate invoices, manage receipts, and perform time-consuming calculations.
Software systems can also eliminate your need to slog through stacks of paper and other documents.
Make sure that the software you choose meets your accounting needs as a business. In general, functional software should incorporate all of the accounting basics of running a business.
These include capacities to keep track of inventory, accounts receivable, accounts payable, tax payments, invoices, payroll, cash flow, and/or a general ledger.
If you do decide to use Microsoft Excel or other DIY bookkeeping systems, ensure that it is user-friendly, accessible from multiple monitors, and organized. You may even want to do a quick Excel tutorial if you are unfamiliar with its helpful formulas.
2. Produce Monthly Reports
The secret to easy bookkeeping is keeping your fingers on the data at all times. The best way to do this is to produce monthly financial reports.
A financial report should give you a comprehensive overview of the month’s financial activity for your business. Most reports include a monthly profit and loss statement, a report that presents income activity.
An income report includes a summary of your monthly income, the cost of the products or services you’ve sold, and expenses. It also will detail your total accounting and profit loss.
This profit and loss statement is essential for providing a birds-eye view of monthly cash flow. It can be a useful tool for honing daily business operations, anticipating tax payments, and identifying solutions for product costs.
You may also want to generate a monthly report about business assets, equity, and liabilities. These statements can be useful for getting a more clinical perspective of a business’s financial health and foundation.
Keep copies of these monthly reports in a digital, accessible folder. You may also want to print them out regularly and share them with relevant parties.
3. Set Aside Tax Payments Regularly
Most small business owners dread tax time. Tax Day can be daunting, especially if you are new to navigating it as a business owner. A lot of business owners have to take out personal loans to cover annual tax payments.
Bookkeeping should keep track of taxes and anticipate tax payments so that the next April is as headache-free as possible.
When it comes to easy bookkeeping, get in the habit of calculating income tax every month and setting these payments aside for future use.
We recommend establishing a savings account designed solely for tax payments. Keep this account separate from your personal savings or checking accounts.
How do you calculate monthly income tax estimates? Many bookkeeping software systems automatically calculate these tax estimates for you.
If you are tackling bookkeeping without such software, you can calculate tax based off of the accounting profit and loss numbers acquired in an income sheet. Or check out this nifty income tax calculator.
4. Go Paperless
We really do live in a digital age. Going paperless can be an essential component of ensuring easy bookkeeping practices.
Store all of your accounting data in the cloud, if possible. If you invest in a bookkeeping software system, you’ll be able to store all of those critical numbers in one easy locale.
If possible, send and receive digital invoices. Use a business credit card for all expenses so that you can automatically document expenditures. Avoid using cash, as it can be untrackable.
Going paperless can also ensure that you don’t have to wade through file cabinets or boxes of documents to gather key information from past financial statements.
5. Review Finances Weekly
It’s best to sit down with your business finances on a weekly basis. This is particularly important or small business owners who start out doing bookkeeping on their own.
A weekly financial review should entail an inspection of all accounts, payable and receivable, and the business’s financial condition. Your weekly overview can also be a good time to reconcile your accounts, anticipate future large expenditures, and calculate income tax.
Some savvy business owners use this time to produce a weekly comprehensive report.
6. Consider Outsourcing Accounting Needs
All in all, if easy bookkeeping seems out of your range of foreseeable tasks, consider outsourcing accounting needs.
Hiring a professional accountant well-versed in your industry can free up time on your end to do the things you need to get done.
What’s more, accountants are more likely to find solutions for lowering annual tax payments. They’ll prevent financial slippage and potentially maximize income statements.
Accountants are also likely to have a more extensive background in managing corporate finances than standard bookkeepers.
Easy Bookkeeping: Final Thoughts
Navigating your financial data doesn’t have to be hard. Enjoy easy bookkeeping by investing in a software management system that suits your needs.
Go paperless when possible and anticipate tax payments. Generate monthly reports and weekly reviews. At the end of the day, outsourcing your accounting needs can be your secret to success.
Bonsai Finance is here to help you navigate your finances at all stages of life’s journey. If Tax Day is proving a strain for your business, we’re here for you. Learn more!