Bookkeeping is about more than just complying with government regulations when tax season rolls around. A solid bookkeeping system provides you with essential information that you can use to improve your business and ensure financial success. According to research by U.S. Bank, 82% of businesses experience cash flow problems, so we have created a list of bookkeeping habits to implement to ensure that your business won’t run out of funds.
1. Monitor Your Transactions Closely
Staying on top of your transactions is the cornerstone of a good bookkeeping system. Each day you should take time to ensure that your deposits and receipts match up. Take a look at whether or not:
- Cash is being deposited according to the proper schedule
- Your merchant services fees have changed at all
- There are any unauthorised payments on your account
Making a habit of this daily review will keep your records up to date and allow you to rectify any mistakes quickly, rather than allowing them to compound.
2. Track Every Single Expense
There’s just no way around it. If you want to manage your bookkeeping well, then you need to track every single expense. Fortunately, this is fairly easy to do when you open a separate business bank account. Your business bank account or credit card will function as a basic accounting system and keep a record of all of your transactions in one easy-to-access place.
Pay with a card, rather than cash, whenever possible to automatically create records. When you pay with cash it’s all too easy to forget to log the transaction, lose your receipt and then have to forgo the write-off when filing your tax return.
3. Check Your Financial Data Monthly
Checking your transactions daily isn’t enough. At the end of each month, set aside time to analyse financial data and identify trends that may affect your business, either positively or negatively.
Tracking your income monthly allows you to see which areas of your business are growing and which are in need of improvement. This also allows you to look at which activities generate the highest return on investment and gather data that may inform a future course of action. This data is also incredibly useful in identifying and predicting seasonal trends.
Daily income tracking is important but going over your numbers each month will help you to see the bigger picture and understand how well your business is faring in the long-term.
4. Invest in the Right Accounting Software
Cloud based accounting software is no replacement for the services of a professional accountant or bookkeeper but it can certainly help take care of the grunt work. Programs like Quickbooks and Xero streamline the management of your financial documents, making it faster and easier than ever to file and organise receipts.
As well as this, accounting software can help automate a lot of your invoicing. You can create a dashboard that will instantly tell you which clients have outstanding payments so that you can take fast action and collect the balance more quickly. Furthermore, you can automate invoice reminders and automatically add late fees to incentivise customers to cough up.
5. Hire a Professional
We’re not sure that this counts as a “habit” per se, but the sooner you outsource to a professional bookkeeper, the better. A professional will offer a keen insight into your current cash flow situation and be able to offer advice on how you can make significant improvements.
Furthermore, a bookkeeper will be able to spot trends and alert you if anything looks amiss. Although forking out for an added expense may seem counterproductive when trying to improve cash flow management, a professional bookkeeper will save you a huge amount of time and money and protect your business from fines, fees and cash flow problems.
Cash is king in business, so implement the above habits as soon as possible in order to protect and improve the financial health of your company. It’s hard to plot steady growth when you are continually running into cash flow problems, so if you find yourself struggling to stay on top, don’t hesitate to invest in the services of a professional bookkeeper who can keep their finger on the pulse and the cash flowing in the right direction.