Accounting plays an essential role in business, and accurate bookkeeping helps in financial forecasting and alerts you to potential financial gaps. But, conversely, any small mistake in record-keeping and lack of management can halt your business growth and put you on shaky ground.
Following are the best bookkeeping practices that you should maintain to get the more accurate financial data for your business:
In a nutshell, you should keep track of every dollar you spend and ensure that each receipt is filed in the appropriate tax write-off area. It doesn’t need to become sophisticated unless you start offering payment terms and credit in conjunction with accounts payable and receivable, payroll, and other related processes. But the situation is much simpler if you are alone and have everything you need to do the task.
You must perform double-entry bookkeeping, which requires that your debits and credits always balance. So for each transaction, one account is debited, and another account is credited.
Scan Business expense receipts
According to the IRS, records for business expenses must include the amount paid, proof of payment, the date, the name of the payee, and a description of the item or service received. So, while you can use a bank or credit card statement to show proof of payment, you will need another document to provide the purchase details.
I recommend scanning business expense receipts right away before they have time to get lost, trashed, or faded. Then, use your phone’s camera to click a picture of expense receipts immediately so they don’t get lost. Then, you can email the picture to yourself or add it to a designated share point for easy access later in the accounting process.
Use of the separate account for the business
Keeping your personal and business income, sales, and purchases account separate is one of the primary bookkeeping practices that should be maintained. The reason to keep your personal and business account separate is that there are times when you need to pay from your account for your business expenses. This isn’t a problem, but ensure it is noted in your accounts book. You don’t want glitches in your income, sales, and purchase accounts, as it might create confusion later.
Make a simplified Record-keeping system
Every transaction your company performs should be recorded and organized to make it simple for you to keep track of and manage your cash flow. Keeping track of all business records, such as invoices, receipts, and costs, will help you anticipate future business prospects and ensure tax compliance in the event of an audit.
While there are simple solutions to digitize paper receipts, keep them in a closed and secure cabinet and organize them into a simple system if you maintain paper records. It’s also a good idea to have a copy of your documents if something goes missing. Most cloud-based bookkeeping software can scan receipts with your phone and send electronic bills directly to your online bookkeeping system for reconciliation and record storage.
Reconcile Accounts and prepare reconciliation reports
In my opinion, not only is it required to keep a record of all expenditures made by the firm, but it is also necessary to reconcile those records with any purchase orders and delivery receipts that may have been issued. Both of these tasks are necessary to fulfill the company’s requirements.
An individual known as a bookkeeper is the one who is given the responsibility of ensuring that this need is met on time. A bookkeeper is also familiar with the procedures necessary to record any transactions that were conducted utilizing credit cards or petty cash in your accounting system. In addition, they can monitor who spends how much and identify any possible instances of money being frittered away.
Tax Season preparation
This is just one of the usual purposes of accounting, which has been adhered to with every business. Tax declaration is a necessary procedure for every organization when their earning proportion reaches the limit of tax settlement under IRC. The bookkeepers update you throughout every tax obligation settlement day with the help of software alerts. This protects you from tax obligation penalties by showing before tax repayment season. They will additionally sustain you with exact tax obligation details and aid you in exercising tax accounts. With the software application support, you can process audits and meet all tax demands with clear paperwork in digital form.
Hire a Professional Bookkeeper. Managing bookkeeping daily will help you meet deadlines during tax time and make financial business decisions. However, the countless data entries are always prone to errors that cost you high. Working with a professional bookkeeper or hiring bookkeeping outsourcing services can help you streamline the process and reduce the stress of this overwhelming process.