Tips for Better Bookkeeping
Pick a system and stick to it. There are several choices for tracking your daily business transactions. Research them and choose the one you feel most comfortable with and then get into the habit of using it on a regular basis.
Develop a system for tracking the checks you write. Checks over a certain amount deserve extra attention and perhaps a second signature. If you are a partnership, then have another partner signature required. Use your checks in numerical order and always account for voided checks by making an entry in your checkbook. Also review canceled check images that come with your bank statement. In fact, you can go online and do this at any time.
Reconcile your bank statement every month. To simplify this task have your bank cutoff the statement as of the last day of each month. The reconciled cash amount should then match the cash balance in your bookkeeping system.
Separate your personal finances from your business finances. The simple way to do this is by having a separate checking account and credit card just for your business. If you can’t get a credit card in your business name, then at least choose one of your personal credit cards and use it only for business purchases.
Use a filing system. Start a series of file folders at the beginning of each year. Label each folder: expenses, invoices to customers, equipment purchases, inventory, and so forth. Be sure to file all of your daily paperwork in the correct file on a regular basis. You never know when you will need to research a transaction to prove that you paid a bill or to check on what you were charged for a purchase.
Keep a calendar of all your tax due dates. Fill it out in January for the entire year. Depending on the size of your business and your payroll, you may have to make tax deposits as often as monthly. Remember to include your sales tax payments and your personal income tax deposits. If you are incorporated, you will have to make income tax deposits for the corporation.
Use numbered purchase orders and invoices. This will make it easier to spot employee fraud. And be sure to account for any lapses in the numbering sequence, such as voided items. The number sequence also makes it easier to go back and research transactions in case anyone has questions or you are audited.
Have a professional install and setup your computer software. It’s an expense that will pay for itself in the time and aggravation you will save compared to doing it yourself. Make sure that you hire someone who will provide follow-up tech support.
Use a chart of accounts to code your transactions for entry into your bookkeeping system. This will help ensure consistent recording of income and expenses so that the financial reports will provide more useful and meaningful information.
Always use a check, ATM debit card, or credit card when paying for business expenses or purchases. Cash transactions are much harder to track and can’t be reconciled as easily to your bank statement. It is considered unprofessional to deal in cash.
Create and review your financial reports each month. Prepare a balance sheet and income statement and go over them with someone who can explain what they are telling you about your business performance and your tax liability. Realize that the net profit on your income statement will be the basis for taxable income on your tax return. In addition to income tax, you will owe self-employment tax (unless you are incorporated).
Learn about online banking and use it. You will be able to log in to your account from any computer with an internet connection
Get expert help with your bookkeeping. Consider how many hours you spend each month on paperwork and how much revenue you could be making instead.
Categories: For Bookkeepers