One of the most important aspects of running a small business is successful bookkeeping. It keeps everything organised, transactions remain on record (in case evidence is needed or you simply need to refer to an old transaction), and makes filing tax returns a lot easier.
The following tips should help you maintain affective bookkeeping so that you can spend your real energy on running the business and making profit.
Always keep hard copies of receipts and invoices
Computerised statements are great and easier to manage, but as with anything digital, unless you periodically check on files, a simple computer bug can wipe them put in one fell sweep. If you computerize your accounting you may not need to keep as much paper, but you still want a paper trail in case something happens to your computer records or you need the backup information for a transaction that is questioned at a later date. Having all your files in the computer also enslaves your business to dependency on electricity – so what to do when the lights/current go out?
Always print your invoices when you issue them and put them in a folder organised into months then invoice number order. You can get an A4 ring binder and hole punch from Staples (and don't forget to keep the receipt!).
Do the same for any invoices you receive yourself, either via the post or sent in an email. Make sure you pay them before you file them away though! If you use a receipt pad for cash payments from clients then you can do the same if they're large ones or leave them in the book if there's a carbon copy. Don't lose the books!
Update records dailly
You should keep your books and records updated on a daily basis. At the end of every day go through, collect receipts, add up the sums and keep your books clean. In some businesses waiting a week to update your records can be very hectic. You may misplace something, forget that you put some cash aside or you may make errors due to the large amounts of data. If you wait months or even the whole year you’re setting yourself up for big trouble. If you want to have a firm grasp on the financial stability of your business then daily bookkeeping is a must.
The bottom line is to keep everything organised and at hand at the end of every day; so it 3 months you will still have everything organised and at hand.
Keep separate bank accounts for personal and business expenses
Open a business bank account and use it to pay your business expenses. Don’t use it for personal expenses, and don’t use your personal bank account to pay for your business expenses either.
Have a separate bank account for your business and for your personal spending and keep the bank statements in a ring binder. Most definitely, keep file of the business statements, but it also makes good practice to keep your personal ones in case you get confused. This practice will save you precious time, money and energy.