For small business owners, bookkeeping can be your least favourite task unless you are a fan of working with numbers. However, there are some good habits you can adopt so costly errors are prevented especially when it comes to record keeping. Once you are busy dealing with the financial details of your business, it is easy to overlook one of the most important aspects of your business. Although you might get tempted to tweak your budget, the problem may worsen once you lose track of your financial activity. It is important that you have a bookkeeping system in place so you can handle your money properly and prepare your records in time for audit.
When you fail to track your expenses, you may encounter problems with missing tax write-offs in the end. When it comes to business credit cards, make sure they are tracked and kept together. Your payments must be kept up to date and the bill must be categorized into types of expenses. One way you can prepare for audits is to mark your calendars to keep track of important dates. This way, you will be able to substantiate expenses for your tax records. As a result, you will no longer have to worry about being audited.
Monitoring business bank account deposits can also help you determine if you are ready to pay taxes or grow your business. Having a separate bank account for your business will help prevent using your money for personal expenses.
Another bad habit that can hurt your cash flow is allowing your bills to be left unpaid. A bookkeeper can track your billing and put a process in place so you can ensure that bills are paid in a timely manner. When there are unpaid bills, a bookkeeper can simply make a phone call and levy penalties. If clients are late in making payments, make a plan so you will know what to do.
Analyse your budget before venturing into a big project and be honest about your financial standing. If you are always in denial about the expenses that your business incurs, you will not be aware that your spending habits are already hurting your cash flow. You also have to acknowledge that your business may experience seasonal ups and downs. When it comes to major upgrades, it is important that you forecast them so you will avoid taking money when it is not yet necessary. You may have enough money in good months, but you must also keep in mind that you should have enough cash in slow months.
Peter Broberg is a bookkeeping professional with over 20 years experience in the finance sector. With more than 2 decades of experience, Peter provides payroll and bookkeeping services on a professional level. His services cater to small and medium enterprises in Cannington, Kalamunda.