With 2020 finally behind us, it’s time to create new habits for 2021. Have you thought about your bookkeeping habits from last year? Did they serve their purpose and help your business grow, or could you stand to adopt better habits in 2021?
Here are a few ways you can improve your bookkeeping habits in 2021 and beyond.
Create a Business Plan
Whether you’re a brand new business owner or a seasoned entrepreneur, it’s essential to have a business plan. If you haven’t already done so, the start of a new year can be a great time to create one.
It doesn’t have to be long or complicated, but it should provide an operational guideline for your business. You’ll be required to have a business plan when you apply for grants, loans, and other capital opportunities. You may need to apply for funds to help your business grow or even to keep it viable if the pandemic continues through the year.
Don’t Forget to Pay Yourself
Cash flow challenges can happen to any business, and it’s become more prominent as the pandemic lingers on. A recent survey by lending platform Kabbage found that about a quarter of small business owners who responded went up to six months without paying themselves.
Regardless of the reason for this, it’s important to pay yourself, whether the business is booming or struggling. You wouldn’t expect your employees to work for free, and you shouldn’t either.
An essential aspect of bookkeeping is keeping track of cash flow, inventory, taxes, and compensation. If you find yourself spending hours on these tasks, it might surprise you that hiring a professional can not only save you time but find the money you can now use to pay yourself.
Make a Plan to Tackle Your Debts
For many businesses, debt is a necessary means to building your company. As a business owner, you wear many hats, which can cause essential aspects like debt management to fall by the wayside.
One way to stay on top of your debts is to automate them. Setting reminders and auto-pay can ensure you’re paying on time with little effort on your part.
If your business requires more capital to keep running, consider an SBA loan rather than maxing out credit cards or other high-interest options. It can be hard to determine the best way to incur more debt and handle existing debts without potentially harming your business.
Work with a Professional
Unless your business is bookkeeping or accounting, it can be worth hiring a professional to keep track of your business expenses and help you craft a winning strategy.
You may only think about your accountant as tax season approaches, but you can benefit from their expertise year-round. Think of your accountant and bookkeeper as part of your team or a business advisor. They can keep you on track, ensure your meeting your goals, and spot potential issues before they become a problem.
(This story originally appeared on Due)
Last week in a discussion with a business coaching client, I asked if she had updated bookkeeping and accounting records that would help her make the best business decision for a big question about her business. “No,” she replied, she didn’t have updated books. Without them, any decision regarding product lines, pricing, or customer capacity is just a guess!
Guessing is not the way to run a business. On the contrary, every business big and small should have regularly updated bookkeeping and accounting records so business leaders can make the right decision with a foundation in the data. Follow along to learn three big benefits of keeping your bookkeeping and accounting records updated on a regular basis and some tips to get you started with your bookkeeping for your business.
Strategically ladder-up your revenue
As a freelance writer for my primary income, one of my biggest goals is finding the best clients that offer me the most significant return on my time invested. While freelancing is a business that is tough to scale, I like to do something I call “laddering up” my clients where I climb up and add new high-quality clients while letting go lower-quality and lower-paying clients as they are replaced.
This process is great in theory, and most freelancers and business owners understand the concept. But why do they continue to struggle with low-quality clients? Because they don’t look at the numbers and objectively look for ways to bring on better clients and get rid of the bad ones. With no metrics, you might not even know which clients are draining your resources and which lead to the best profitability in your business.
A few months after quitting my job to go full-time online, a look at my own updated bookkeeping records showed that about 76% of my income came from writing while around 15% came from website development and support. That is a clear 80/20 rule example. I cut the 15% of my income that was taking way too much of my time and my total income roughly tripled over the next few months!
Cut under performing products and services
The focus of my conversation with the coaching client focused on turning her services into a product she could sell for a fixed monthly subscription rate. But with no detailed accounting records beyond the reports she gets from her payment processor, she didn’t have any real records to show her income by customer or product. It doesn’t matter if you are a solo freelancer or a business with thousands of employees, you absolutely need this information!
With the right details in hand, you can pick out the one product that sucks away too much of your time for too little money. You can identify expensive recurring tasks you may be able to outsource or eliminate. As you can see from the example above, sometimes cutting underperforming products or services can lead to significant growth.
Success in this area of your business comes down to focus. But without properly updated bookkeeping and accounting records, you don’t know where to focus. You might be wasting hours and have no idea because you don’t have the data. End that big mistake right away. Get those accounting books together and keep them updated, at least monthly, so you can make the best management decisions.
Save time and money at tax time
If increasing revenues and cutting costs were not enough motivation to keep your books updated, here is one last lynchpin: your taxes. You have to do taxes if you have a business. That is not optional. What is optional is making it a stressful period by ignoring your accounting throughout the year and rushing to get it all done in April before the deadline.
Instead of this method, plan and keep your books updated at least once every month. I go a little over what most people need and update my accounting records weekly. But whatever you do, quarterly should be the bare minimum for bookkeeping updates for tax purposes.
While most individuals have to file and pay taxes once every year, most business owners and many side hustlers have to pay quarterly estimated taxes. While you can file and pay based on last year’s tax rates, keeping your books updated can help you get a better estimate if you need to pay more quarterly to avoid the big one-time lump payment in April.
If you have your bookkeeping updated, you just have to print out a P&L and balance sheet and can finish your taxes from there. No other prep needed!
Don’t ignore updated bookkeeping and accounting needs!
If you find the idea of accounting and bookkeeping intimidating, you can always hire an expert to handle it for you. We can help, give us a call at 714-400-9201.
However you decide to do your bookkeeping is great as long as you stick with it! If you don’t, you’ll quickly find yourself behind and with useless financial reports. With the right focus on your books, you have the right information to put your business on track to thrive for years to come.
80% of business owners, who use outsourced bookkeeping, say they can spend more time on their businesses. Now, you no longer need to worry about doing your bookkeeping. You can have outsource bookkeeper do the job for you.
With bookkeeping out of the way, you can focus on what matters most to you, your business. Below we will review some of the ways that hiring an outsourced bookkeeper can save you money.
Outsourced Bookkeeping Is Quick and Efficient
You or your employees may not know what they are doing when it comes to bookkeeping. You’ll be wasting a lot of time working on your books when you should be focusing on what you’re truly good at. That could be running your establishment or your employees doing the main tasks of their job.
When you outsource this position, it will reduce the amount of time that will be spent on bookkeeping. An SME will have the bookkeeping done quickly. They will be familiar with what needs to get done and how it needs to get done.
On top of that, you’ll avoid paying any penalty fees as your books will be done on time every time.
Moreover, this saves you money as it will give you and your employees more time to focus on your business. You won’t be hiring your employees on for longer hours. You’ll be hiring someone else to do this job for you at a cheaper rate.
No More Errors
When you hire an outsourced bookkeeper you won’t have to worry about errors in the books. If something is miscalculated you could spend a lot of time fixing a simple mistake.
Then again, maybe some items didn’t get logged, this will show discrepancies in your books. Discrepancies can lead to fines which will cost you more money down the line.
Moreover, with an outsourced bookkeeper, they will know all the standard regulations (GAAP). They will adhere to these regulations. SMEs will know what they are doing so you can breath easier.
Outsourcing Increases Productivity
When you or your employees don’t have to focus on bookkeeping, more time spent can be spent on your business. It is one less distraction from the main duties and tasks that need to be done.
When there are more tasks to be done it can feel overwhelming. You or your employees can become overworked and fatigued. This means no one will be fully engaged in the duties that matter and they may make more mistakes.
Only Pay for What You Need
If you choose to hire an outsourced bookkeeper, you won’t have to pay part-time or full-time wages. What’s more, you won’t have to worry about providing them with benefits.
On top of that, there are a plethora of payment options that you can choose from. For example, you can pay a fixed rate or an hourly fee.
When you use an outsourced vs an in-house bookkeeper you can choose how often you use the service. You don’t need to keep someone on staff at all times.
With an outsourced bookkeeper, you don’t need more office space or computer equipment. You don’t need to buy any of the accounting software that would be required to do the expenses.
Many firms even use cloud-based accounting software. This allows you to easily view your financial information.
Customize the Services You Receive
There are different services you can choose from when you outsource your bookkeeping. You only pay for the services you want and nothing more.
For example, you can hire someone to work on your income statements and balance sheets. At the same time, if you don’t want them to work on your cash flow management, you can opt-out of that service.
Is Outsourcing Right for You?
If any of these benefits appeal to you, outsourcing may be right for you. Outsourced bookkeepers will keep your business financially secure and help it thrive. With Alvarez Tax Inc. at your side, you will have better peace of mind.
Reach out to us today if you have any further questions on outsourced bookkeeping.