Why is Bookkeeping Important for Small Businesses?
Accurate records are essential for good business practices and you need to keep records up-to-date to track profit and loss.
A business owner must closely monitor cash inflow and outflows to ensure enough operating funds are available. Accounting software can make bookkeeping processes simpler and can help detect fraud and mismanagement.
Bookkeeping is important for calculating the tax implications.
- It is important to separate business and personal finances to ensure that a business owner will not be personally held liable for any debts.
- Reconciling the books is important and a mistake can result in large penalties if miscalculations are sent to the tax department. Identifying early mistakes by managing transactions and reconciling accounts helps avoid financial issues later on.
- Simplifying business finances by streamlining tax processes is also necessary. With tax codes frequently changing, it’s important to ensure that the software used in bookkeeping for a small business will keep you updated with the latest laws and regulations.
- Tracking cash flow and having the ability to cover unexpected expenses is important. A bookkeeping service will give you an alert when a problem arises and therefore track your income and revenue closely.
- Organizing documents and records in a simplified process makes it easy to apply for a business loan or buy new equipment.
10 Hidden Secrets on How to Bookkeeping for Small Businesses
1. Choosing the correct accounting software
It is one of the important requirements when making a decision on bookkeeping services for small businesses, as choosing the accounting software requires considering the cost and features. Inventory tracking and tax preparation software programs can help streamline bookkeeping for small businesses.
2. Choosing an accounting method
While choosing bookkeeping for small businesses is important to choose based on the two appropriate accounting methods:
1. Cash-based accounting
2. Accrual-based accounting.
In cash-based accounting, income is recorded as it’s received; otherwise, it’s not considered revenue.
A disadvantage of the cash method is that it only provides short-term information on the business's financials. It is the simpler of the two methods and is used for short business cycles when inventory is not involved. Businesses that sell directly to consumers and have annual revenue over $25 million should not use this method.
In accrual-based accounting, income is recorded when it’s billed, not when it’s received. Once the invoice is generated, the income gets recorded and provides a broader financial picture
A disadvantage is that you may not always know what funds you have on hand and you might not have the necessary funds when you have many outstanding invoices.
Difference between cash-based accounting and accrual-based accounting.
3. Track and record every expense on the same date
The most efficient method and hidden secret for small business bookkeeping are to record every expense on the very same day it is paid from your business account, including the payment method and purpose of the transaction.
4. Preparing a bookkeeping schedule
Bookkeeping services for small businesses will have a schedule that can help you stay organized and aware of where you stand each week and month, such as paying vendors at a pre-specified time each month, reconciling monthly bank statements, recording revenue and costs weekly or quarterly and making financial analysis based on that.
5. Creating a financial report
At the end of each month, a financial report and quarterly expense report are created for those who provide bookkeeping services. A balance sheet prepared at the end of the year is a glance at how much your business is worth. This is generated by looking at the assets and the liabilities. It can help you determine whether you are taking on too much debt to support its revenue.
6. Ensure your bookkeeping software pays bills and invoices on time
In order to know the best way to bookkeeping for a small business, use the software in bookkeeping that track when invoices are due. Most of the software programs available today include automatic bill payments and bank transfers on a monthly basis.
7. Separating personal and business expenses
One of the first steps toward efficient bookkeeping when starting a new small business is to separate business and personal funds records. This will eliminate any possible confusion.
8. Pay salary to yourself
As the owner of a small business, you should set aside a certain amount of money each month as a salary. Record this transaction in your business bookkeeping as you would any other business expense to be separated.
9. Using updated technology
Choose the provider that offers bookkeeping services for small businesses in addition to recent technological upgrades. Integrating the most recent communication systems with your bookkeeping software allows you to communicate more effectively with your vendors and suppliers.
10. Invest in a service that will provide qualified accountants
It can benefit your business if you choose a provider that may have an accountant for more than income tax filing purposes and that also provides virtual assistance from the CFO. When choosing any bookkeeping services, you should talk with the team first and check their client list and their accountants' qualifications and experience.
Why Choose IBN Tech to do Efficient Bookkeeping for Small Businesses?
With over 22 years of experience and expertise serving more than 200 clients in bookkeeping services, controller services, accounting systems, and integration, IBN Tech can help you increase revenue by saving up to 50% on finance and accounting overhead costs.
Accounts payable, accounts receivable, reconciliations, revenue reconciliation with bank deposits and electronic document management are all part of our bookkeeping services.
Outsourcing bookkeeping services by IBN Tech
Countries we serve
US and UK
Industries we serve
Automobiles, banking, healthcare, hospitality, insurance, mortgage, multi-location businesses, non-profit organizations, travel, recruitment firms, retail, and telecommunications.
NetSuite, Quickbooks, Quicken, Sage, and much more
99.99% accuracy in the work delivered
CFO services - virtual assistance
With the IBN Tech outsourcing bookkeeping services for small business, you can begin to streamline your finances and bookkeeping processes to give your small business the best chance of succeeding.