Managing the books is a basic first step for several small-business entrepreneurs. It saves the cost of employing someone else, but it also adds work over the business owner’s head. Although basic bookkeeping is easy, it has to be precise. Hence, it only makes sense that you hire bookkeeping services.
Keeping the following things into consideration will help you manage your financial accounts at all times.
1. Differentiate between all personal and business expenses
It may appear more comfortable to utilize your pre-existing personal bank account for everything when you initially establish your company. You might also use your corporate cards to make a personal transaction. Any one of these may create considerable problems in your organization and with your bookkeeping. If you keep both entities separate, you will have less work at the end of the year. And since the tax responsibilities for you and your company are essentially different, your bookkeeping services in Mesa will be able to do taxes more efficiently.
Another main reason to segregate is to protect your personal risk from the liabilities of your firm. If a court decides that you combined your personal and business money, you may lose the legal cover, a process known as breaching the corporate veil. Retaining all of your funds separate safeguards your financial property from being taken over by a plaintiff.
2. Proper Bookkeeping Method
Choosing a suitable bookkeeping technique for a small business is the crucial first step towards maintaining accurate—and comprehensive—financial data. If your firm is a “one-man show,” solitary bookkeeping may do. Small companies with many sources of revenue and costs will gain from employing the double-entry accounting approach. Single-entry accounting is similar to having a personalized ledger. All credits and debits are issued and debited from the same bank account, and the firm only requires a single log to record the activities. Dual bookkeeping includes two journals: one for debits and one for credits. Your small business bookkeeping services will be able to suggest a better technique for your specific business. The revenue is recorded in one book, and we debit the costs incurred because of the income in the other.
3. Be Precise
Regardless of the bookkeeping system used, always preserve detailed records. Don’t round figures up or down to make the total amount easier to compute. This puts the books out of sync and presents issues with balancing the books and paying tax. If the company paid 44 cents on postage, record 44 cents for the stamp; do not disregard the transaction since it is minor. The top bookkeeping services in Mesa suggest that you shouldn’t even round up $1.99 to $2. Carefully input the precise amount of any debt or credit transaction.
4. Transactions Must Be Properly Categorized
We should assign every bookkeeping activity a category. There are several sources of revenue, such as short-term loans, subsidies, and the direct money earned by the firm. Wages, staff perks, office equipment, manufacturing materials, and running expenditures are all examples of costs. Whenever these transactions are put into the records, they must be classified so that the entrepreneur can quickly recognize the cash inflows and outflows.
5. Recognize Transactions
It is also prudent to record each transaction placed in the records. While accounting for salary, for example, every employee’s name and salary id number must appear on a memo line with each transaction. Never simply label a credit “Deposit” or a debit “Expense.” Carefully classify and then verify each transaction, so there are no doubts about the input.
6. Periodically Reconcile
Regularly reconciling the accounts is one of the top tips given by bookkeeping services in Mesa. Generally, we perform it at the arrival of the bank statement. Never dismiss the record. Reconcile the accounts against the financial statements as soon as possible to verify that there are no accounting mistakes. Check the book against the bank account if you keep a single-entry book. To ensure that the 30-day total aligns, double-entry small business accounting services in Mesa conduct a trial balance which is the total of every book, debits, and credit.
If they don’t, there’s a problem with the debit or credit accounting. Firstly, detect and rectify the issue, and then reconcile the transactions with the bank statement.
7. Wherever Feasible, Automate the Process
There are several software solutions available to collect and consolidate transaction information and provide statistics. Since financial statements are virtually usually up to date, automating accounting activities provides a more accurate understanding of what is going on in your firm.
Automate tasks such as:
- Invoices that recur
- Direct payment of payroll
- Reporting through email
- Reminders for bills
- Reconciliation of bank accounts
8. Make a Budget for Major Expenses
Whichever your business, there might be a risk that some piece of machinery may require a replacement, a large stock order, or some other high-ticket expenditure would come up. Preparing for massive costs allows you to face things without fear and with enough finances to manage them smoothly, without having to redirect resources from other parts of your company.
The simplest approach to prepare is to include it as a line item in the reports. Establish a dedicated emergency fund in which you will deposit a set, consistent amount of money so that it will be available to you before you need to use it.
9. Hire a Small Business Bookkeeping Service
While company owners are used to wearing several hats, they reach a place where no amount of tenacity or passion can help, particularly when it comes to bookkeeping. Consider your time and set a monetary value to it. Weigh it against the price of outsourcing to see if it’s good enough to justify your time and money to make the switch.
Consult a professional if maintaining the books is scary or if the small-business entrepreneur has screwed up the books much further than repair, regardless of how manageable the organization is. All companies pay taxes at the end of the year, and if the IRS decides to inspect the company, keeping proper documents is critical to ensuring a smooth resolution.
Small-company owners who may not want to engage with the bookkeeping side of the firm can employ someone competent to do it. If you are a small business owner in the Mesa area, feel free to call our bookkeeping experts at M&M Accounting LLC for all your accounting and tax filing needs.