subject: 4 Bookkeeping Tips For Small Businesses [print this page] One of the important outcomes you expect from your business is to make a profit. However, during the start-up phase, this may not be immediately possible for several reasons. Perhaps you are not entirely familiar with the market conditions or you do not have the necessary experience in the field in which you function. While such losses due to errors of judgment grow smaller over time, there is another common culprit that has the potential to drain your business profits unless you take immediate corrective steps faulty bookkeeping. Several businesses hire an accounting firm to manage their paperwork of financial transactions but you can do this on your own with a good bookkeeping system.
File All Relevant Documents
Make sure you have a system to keep permanent and temporary documents safe, preferably separate from each other to avoid accidental misplacement.For example, you will need to have capital assets, insurance and loan documents for much longer time than the monthly statements from suppliers.
Reconcile Regularly
Merely maintaining the records is not sufficient; you ought to regularly reconcile the details recorded in the document with your accounting system. For example, check to make sure that the expenses you have recorded in your accounting ledger match those recorded in your bank account and credit card statements. This helps you notice any discrepancy at the earliest and you can take timely corrective action rather than agonising over what went wrong after many months of the incident.
Plan Your Expenses
Bookkeeping is not just about recording your expenses; it can give you valuable insight into mapping your futurebusiness. If you anticipate the need to spend on a major task such as installing specific computer software, plan for it at least a year in advance so that you schedule it for that time of the year when your business is doing well rather than the slow period.
Put Money Aside for Taxes
As any accounting firm expert will tell you, the credibility of your business rests on how well you comply with regulatory requirements. The Canada Revenue Agency specifies the taxes you need to pay and at what durations. Make sure you have the money ready to make these payments on time by regularly setting aside a portion of your income towards making tax payments. A common mistake that many business owners make to overcome this cash crunch is to use the payroll taxes they should be sending to the CRA to meet other tax expenses.
As an entrepreneur, you are probably too busy with too many things and think you do not have the time to set a bookkeeping system in place. However, this may prove to be as costly a mistake as driving with faulty brakes, saying you do not have the time to have them put in order. Trying to keep all financial details in your head will ultimately take its toll on your business and therefore, it is vital to set up an accounting system that works.
