Does your business need help staying organized, but you don’t know where to start? Bookkeeping is an essential component of any successful business. But what is bookkeeping exactly? It may seem like a broad term, but we’ve put together a helpful list to outline some of the basic elements of bookkeeping.
Debits and Credits
One of the backbones of bookkeeping is debits and credits. Bookkeepers record what your business spends (debits) and what your company earns (credits) to help you keep track of your finances and cash flow.
While not the most glamorous of tasks, invoicing is crucial to getting paid. Suppose you fail to collect fees owed to you due to oversights in invoice collecting and tracking. In that case, you will be handing out products and services for free and losing money in the process. When you dreamed of opening a business, you probably didn’t picture yourself tracking down invoice payments from clients. This is why hiring a specialized bookkeeper may be an excellent option for you. Not only do professional bookkeepers make invoices are sent and tracked, but we have experience handling the collection of late payments and working with clients.
The other end of the spectrum from accounts receivable is accounts payable—keeping track of the money you owe to others. Your business’s reputation depends on financial stability. Part of that is making sure you reliably make payments on time to local vendors, businesses, and contractors. Build trust in your company, which will keep your credit high and make others want to continue working with you.
Employees are the most valuable asset of any business. Whatever product or service you offer is no good without the people behind them. Not only do your employees interact with customers, but they keep things running smoothly. Once you find suitable employees, you will want to do everything you can to keep them. Turnover and staff training can be expensive and eat up valuable time. Paying employees correctly and on time each pay period is a great way to make sure they are happy. Whether it’s full-time employees or part-time employees, bookkeepers can make sure that all of your staff’s paperwork is in order. They will also organize and collect timesheets, process payments, and file the appropriate tax information.
Bookkeepers work hard to cross every “t” and dot every “i.” In any business, there is a lot of paperwork to keep track of. Your bookkeeper will make sure that your bank statements regularly match up with your bank accounts. Having a bookkeeper will help you avoid mistakes, missed deposits, or incorrect funds.
Taxes can be a stressful ordeal for most businesses. First, there’s the question of whether or not you filed everything correctly. Secondly, there’s the matter of avoiding unnecessary fees and ensuring you get all the credits of which your business is eligible. Your bookkeeper will keep your tax-related documents organized throughout the year, prepare your files, help you plan, and represent you in front of the IRS.
All in all, bookkeeping encompasses all the nuts and bolts that keep your company running smoothly. Paperwork and accounting are not areas where you want to cut corners. By hiring professionals, you can take a great deal of stress off your plate and give your customers, business partners, and staff complete confidence. Consider booking an appointment to learn about ways in which we might be able to help you and your business by calling 714.400.9201, emailing us at email@example.com.
Save all documents
Now here’s something so many small business owners and freelancers don’t actually do: keep hold of anything related to your finances.
I’m talking about receipts (even those that seem absolutely unnecessary), email and other types of online or written correspondation, and anything you can think of that has something to do with the business.
Keep track of everything going on with your money
Some get scared when they hear about budgeting. But that’s where all the control over your money and managing them well begins. By knowing what’s coming in and where it’s going.
Make saving a habit
Habits are important. So we must develop the right ones about every area of life we want to improve.
One such habit when it comes to your finances as a self-employed person is to always be saving no matter what.
Have a separate account for that and set aside something weekly or monthly.
Don’t be afraid to ask for help
You don’t need to do it all on your own.
Speaking to professionals and asking for advice is always a good investment of your time and resources. It will pay off in the long-run too.
Using the services of an invoice factoring company, for example, can turn your whole financial situation around and guarantee you a more secure future.
Their experts offer friendly, fast and reliable services.
Learn more about all the things you can deduct.
So many people pay more taxes in the end of the year than they actually need to.
As a self-employed individual, you’ve got more deductions than you probably know.
Let’s begin with office space and supplies, and anything directly related to the business. If you’re working at home, that can be half of the rent in some countries, or percentage of the house used for office space.
Then comes travel. Your next trip can be considered business costs if you find a way. So keep track of all transactions related to it.
As for mileage, you can calculate what you use from when you’re leaving the office (or your home if these are one) to the moment you come back.
Using your phone too much? International calls, 2 lines, or else? Well, deduct phone bills then.
Some meals and/or drinks can also go without tax considering they go together with meeting a client or potential partner. Need more info? Ask a professional for help or setup an appointment with Alvareztaxinc.
Save for Taxes
If you fail to put aside an adequate amount for your year-end taxes, you could be in for a nightmare this spring when tax season rolls around. The good news is that if you oversee your own business financials, you have control over how much money you are saving for tax season.
Reviewing your returns from the previous three to five years can help you determine how much you should be setting aside each month, but once you’ve set a reasonable figure, do not decrease this amount. It can be very easy to develop bad habits once you start borrowing a little here or a little there, so make sure that you are withholding consistent amounts on a predetermined day each month.
Modern accounting software has revolutionized small business bookkeeping. Most platforms provide everything you need to manage your company’s accounting, but that doesn’t mean you should settle for just any software.
Choose a software program that is specifically designed for small business owners, as these platforms will have built-in templates that allow you to easily input and track basic items, such as invoices, deposits, and check printing. By electing to use a cloud-based system, you can also access your files from anywhere and be sure that your information is securely stored in one reliable location.
The less cash you use to run your business, the better off you will be. As opposed to digital transactions, cash is extremely difficult to track, and if you’re hoping to write off significant expenses during tax season, cash makes it even harder to do so since there’s often little to no record of cash purchases.
However, by using debit or credit cards, you can track exactly how much you are spending, as well as when, where, and for what reason. Electronic payments help create an audit trail for you to reference should you ever need to substantiate any tax write-offs. You can also sync your company cards to your accounting software, which streamlines the entire bookkeeping process and helps ensure consistency and accuracy across the board.
Review Your Finances Regularly
The best way to keep up with your bookkeeping is to keep a strict schedule and vigorously review your company’s financials at least every other week. Twice each month, you should schedule roughly one to two hours to go over your company’s deposits, withdrawals, transfers, purchases, and other key items.
Even if you have invested in trustworthy software to help you manage your accounts, that software requires some human intervention and is still subject to human error. While reviewing your books isn’t the most glamorous task, the peace of mind that comes with having accurate records cannot be overstated.
Taking time to review will also give you a good opportunity to check your accounts receivable to ensure that your clients are paying their bills regularly and on time. If you notice any discrepancies or failure to pay, you can apply some gentle pressure so that your books will be current come tax season.
If you don’t have room in your busy schedule to review your finances on a regular basis, it might be time to start thinking about hiring a part-time bookkeeper ― we offer modest rates and excellent service. But be sure to use a bookkeeping service on a monthly or quarterly basis rather than waiting until the end of the year. This way, you can correct mistakes before they become something more troubling, and you’ll likely also get cheaper rates, as many services are looking to maintain consistent income during their off season.
Prepare for Major Expenses
If you fail to plan for major expenses, you will almost certainly find yourself regretting it at some point. This is especially true if you work in a highly competitive industry and are unable to take advantage of a golden opportunity simply because you do not have enough capital set aside.
However, saving requires a conservative approach to handling your day-to-day business needs. Be sure to save in minor increments over a scheduled period so you can continue to execute your daily operations at a high level; meanwhile, stash away a healthy rainy-day fund for future expenses like updated machinery or an upgrade to your company’s computer systems.
Compile all costs, including payroll payments and other overhead figures. Once you are confident that you have an accurate number, you also need to determine how much your business will need to clear each month to remain profitable, including the cost of insurance paid annually. From there you can detract average costs (be generous in your calculations) and then develop an accurate and ample savings schedule.
As a smaller business owner, there are lots of things that you need to worry about to move your startup to the next level. Not only are you concerned about the cash flow but you also carry the burden of overseeing the day-to-day activities of your startup. Technically, you are in charge of every aspect of your enterprise right from budgeting to marketing, customer service, business development, and accounting.
Bookkeeping is an essential component of any business that enables you to record and track a variety of your business expenses. Poor bookkeeping can lead to a wide range of problems that can bring down your small business. Here are some of the potential issues that may arise should your small business perform poor bookkeeping.
Poor Business Decisions
There is no way you can make accurate business decisions for your enterprise if you don’t understand its current financial health. When you are making tough decisions about hiring or firing of employees, marketing, and business development, you need an accurate and detailed picture of the financial situation of your company. This information is quite crucial since it helps you run critical financial reports and make informed decisions based on the current economic trends that your business startup is experiencing.
Late Filing of Your Taxes
Keep in mind that if you don’t file your tax returns, you will pay interest and penalties which tart to accumulate the day after the due date. You can’t afford to pay such penalties and interest if you are running a startup and you are still struggling to become stable. As if the penalties aren’t enough, a late filing is also a red flag for the IRS that will lead to a business audit. However, you can avoid the problem of late filing by ensuring that your records are up-to-date all the time.
Poor Bookkeeping Can Lead to Cash Flow Problems
What will happen if it is that time of the month that you are supposed to pay your employees, yet you don’t have enough money in your business bank account? You need to keep in mind that certain costs will always come up every month and you need to be prepared to handle them.
However, if you aren’t tracking your cash inflow and outflow, you might be caught up in an awkward situation where you don’t have sufficient funds to cater for your business bills. Such problems can be avoided by practicing proper bookkeeping.
Bad Bookkeeping Can Destroy Your Staff and Client Relationships
Although it might seem like a small issue to let some of your bookkeeping details slide, the results can be costly. The moment you lose control of your books, you are destined to hurt the people you love most; your clients and staff members. Since it is difficult to find the right people to help you grow your business, you have to do everything possible to keep them. You need to make sure that they are paid on time and feel comfortable. Simple mistakes in your bookkeeping can cost you in the long run with high turnover. Clients will also shy away from your business if you can’t conduct proper invoicing.
A happy employee is a productive employee. That is why it is in your best interests to learn how to boost employee morale as an entrepreneur. Being in a startup is inherently stressful, and you will need every trick in the book to ensure that the pressure doesn’t crush your team. Here are 7 ways you can keep employees motivated and working hard, no matter what:
1. Shift to a Shorter Work Week
Many studies have shown that throwing more work hours at a task does not necessarily result in higher productivity. Going with a six day work week, for example, is more likely to lead to mass burnout rather than getting more tasks accomplished. Instead, go the opposite direction. Shift your office to a four-to five day work week. Doing so allows your employees to live better lives outside the office, get higher quality rest, and makes the days they are at the office more efficient and productive.
2. Get the Team Under Natural Sun Light
Natural sunlight impacts the human body differently from manmade lights. Being under the sun can drastically improve mood and nourishment through vitamin D. If possible, open up the office windows and let the light in. Alternatively, you can encourage people to spend more time outdoors through activities or events to get more sun onto them.
3. Keep a Goal Tracker
Not knowing how far along the company is to its goals and milestones can grind away at an employee’s morale. They can feel like their efforts are going nowhere. Keep that from happening by tracking goals and distance to milestones. Even a vague gauge that slowly fills up the closer the team gets to completing a task can keep morale going
4. Recognize Critical Achievements
Nothing gets morale going like public recognition, and if you have a good team, there will always be something to recognize. Make it a special and weekly event. If you have the resources, you can also offer a reward of some sort. It does not have to be compensation. Even a cake or gift card can work well.
5. Incentivize Employees with Rewards and Bonuses
If you want a motivator, look no further than rewards and bonuses. You do not even have to tie them to achievements. Make them more fun, such as awards for having great jokes or a well-decorated cubicle.
6. Plan Team-Building Activities
Push your employees too hard for too long, and you will end up making them feel like cogs in a machine. Those feelings can eat away at their self-esteem and mood, damaging their engagement and ultimately limiting their productivity. Don’t forget to treat your employees like people. Let them just socialize with their team members, even remotely, with team-building activities. Even a few minutes of dedicated “hanging out” time can develop relationships between team members and cheer them up.
7. Encourage Physical Exercise
A person’s physical state can directly impact their mood and productivity. Sickly or unhealthy people will find it difficult to keep a smile on their face and their heads in the game. Encouraging your team to stay fit – or at least physically active – can help mitigate issues common in office workers and work from home employees. To help them along, you can lead by example by exercising yourself.
Keeping employee morale up as an entrepreneur can be difficult, especially in the precedent set by the coronavirus epidemic of 2020, but it is far from impossible. You just need to make the effort and put due focus on your employees’ mental and emotional health.