People who run small businesses know that the only way to succeed. No matter how much revenue your company makes, if you don’t know how much money is coming in and where you are investing it, you won’t be able to budget for future expenses. Your records are an accurate representation of the company’s profits and losses.
Hence, you need to hire bookkeepers that specialise in the Xero platform. On your own, managing money can be daunting. However, if you have a professional on the payroll with the right software, your business will succeed and grow steadily. From reconciling your accounts to keeping track of the payables and receivables, software training, payroll processing and more, having robust bookkeeping software gives you ease of mind regarding staying on top of your financials.
Now that you know why bookkeeping is important for your business, let’s look at a few tips on how to do it better:
Keep Your Personal and Business Finances Separate
The Golden Rule of bookkeeping is: DO NOT mix your personal and business expenses. If you are a freelancer, the best way to make sure you are not using your business’s profit for personal expenses is by having separate credit cards accounts.
Sorting through your personal and business transactions can be a nightmare. By separating them from the start, you will be able to save the time and money spent on categorising your records.
Pay Yourself
Just because you run a small business does not mean that you can freely use whatever profit you make! S-corps and C-corps owners are required to pay themselves a salary. The same does not apply to self-employed owners. However, we recommend that you do it to establish safe spending habits. Even though it will be a draw by the owner, you will establish some boundaries and stop yourself from breaking the Golden Rule of bookkeeping.
Repay Yourself for Any Business Expenses
There will be times when you will pay for a business expense with your personal credit card. We recommend you completely break away from this habit. However, we understand that the Golden Rule can sometimes be broken when you are in a hurry. However, there’s a way to set things right. All you have to do is reimburse yourself.
To do this, write a check from your company’s account. After the amount has been deposited into your business account, list all the expenses, the vendor, date and purpose of spending the amount on a spreadsheet. Don’t forget to attach the receipts. These steps might feel like a hassle, but they will make deducting business expenses easier for your bookkeeper.
Save for Taxes
It’s better to have your tax money in place before tax season rather than scrambling around to check if your business account has the balance or not. Unpaid taxes incur interest and penalties from the ATO. Tax season will sting less when you put aside money each month or are paid for a contract.
Save All Your Receipts
Receipts are the cornerstone of a business. They help identify transactions required by the ATO for tax deductions. So, save the receipts for the expenses you incur for your business, even minor ones like spending $5, and make sure they are all dated in order. Thanks to technology, you can now scan these receipts and store them electronically and avoid clutter caused by printing on paper.
Keep Track of the Invoices
Unpaid and late bills hurt your business’s cash flow. Hence, you need to track your bills. To make it easy for your bookkeepers specialising in the Xero platform to process the bills, make sure that your payments and those due from clients have a deadline. This way, you can take the necessary action to get your money before it starts hurting your operations. Also, you will know how much money you have at the end of the month for expenses.
Choose a Reputable Bookkeeping Software
If you are running your small business all by yourself, you need to have the right bookkeeping software. It will reduce any burden on yourself. Bookkeeping software helps you with invoicing your customers, tracking expenses, etc. You can start with making spreadsheets in Microsoft Excel to become familiar with the basics. It will allow you to understand advanced software. Bookkeeping is a headache that small business owners have to bear. However, by outsourcing this task, you will not only be able to manage your finances but also focus on other important tasks. A few bookkeeping services also offer training for clients who want to manage their expenses on their own.