Running a business successfully is not simple. It has a lot of moving elements to manage. There are matters related to the product, sales, marketing, administration, etc., that require simultaneous management. Every aspect is important and has an impact on the overall health of the business.
However, among all, finance and accounting hold critical importance. Finance provides a macro snapshot of the business’s overall health. Adequate financial systems and controls are crucial for any business’s management and strategy execution, regardless of niche or scale.
Typically, in a business of any size, the finance department has some essential functions required to operate efficiently. These include recording transactions, posting them to ledgers, and preparation of income statements and balance sheets. However, among all, bookkeeping is the first and foremost function of any finance department.
Bookkeeping is the recording of transactions in the first place, whether manually on paper or digitally on software. If done right, bookkeeping can help companies and businesses to identify cost leakages, save losses, and maximize ROI.
Effective Bookkeeping requires some operational and financial systems in place. It is ideal to hire someone with relevant academic specialization and some experience to excel at the job. But, if that isn’t a viable option, here are some tips to make business bookkeeping an easy task.
1. Understand your bookkeeping needs
There are many bookkeeping tools and services available in the market. Some are free, while others charge a premium for added benefits. As a stakeholder, carefully analyze the nature of your business transactions and identify your bookkeeping requirements.
Suppose the business is comparatively small and has basic bookkeeping requirements. In that case, Microsoft Excel is more than enough to get the job done. And as the business grows, you can step up the bookkeeping function with comprehensive accounting software depending on what suits your needs.
Hiring a professional with relevant qualifications such as a master of accountancy is also an excellent idea if the tasks at hand are overwhelming in size and responsibility. Professional accountants and bookkeepers can streamline workflows, customize controls and create more efficient processes to manage company and business accounts.
2. Keep personal and business records separate
One of the most common mistakes small businesses make is mixing personal and business expenses. As time goes by, it becomes challenging to distinguish between personal and business transactions while bookkeeping.
Also, it increases the chances of overstatement and understatement of records, slowing down operational procedures and adding ambiguity while going into the nitty-gritty and forecasting. Therefore, it is best to keep both separate. Additionally, by separating personal and business records, your business will have fewer transactions to manage and a reduced credit rating.
3. Regular review of accounting systems
Working with an accounting system and ensuring that the system is performing right are two different things. It is best to test the accounting systems with dummy transactions to evaluate whether the system is efficient or not.
This can be done by hiring an expert at the end of the year to conduct a thorough audit of the system. An auditor will help identify loopholes and leakages and suggest ways to make business bookkeeping more seamless and regulation compliant.
4. Timely analysis outputs
Besides recording and maintaining financial transactions, bookkeeping provides insights, trends, and critical areas of your business to ponder upon. Accounting records and financial records provide vital details of the business history, present, and potential future. They are critical tools used for strategic decision-making.
Timely analysis of accounting outputs can identify areas that require attention, like declining sales, an abnormal increase in account receivables, cash flows, etc. It can also help to look at a business from a broader point of view. Similarly, it helps identify future business needs such as capital investment, increasing production capacity, and change in credit policy for customers, etc.
5. Keep track of deadlines
There are a lot of important deadlines that are crucial for a business to comply with. These deadlines include payment dates for utility bills, payment deadlines to settle account payables, expected tax bills, etc. However, amid the daily hustle, it is quite possible to forget such deadlines.
If not honored, such deadlines can cause a breach of compliance and penalties. Not to mention, a bad business reputation. Maintaining a monthly calendar and highlighting dates is an excellent countermeasure to missing out on crucial deadlines.
For businesses, bookkeeping and accounting are considered an administrative task. But in reality, they are the foundation of business insights and long-term strategy making.
Bookkeeping systems need to be effectively operated and managed with strategic perspectives to gain massive utility and results. And in the modern tech era, it is possible to work with minimum hassle and maximum utility by getting equipped with accounting software and technology.