Bookkeeping is often seen as tedious. Most entrepreneurs do not enjoy bookkeeping but know it is essential to their business. Adopting some good bookkeeping habits can help your business in the long run.
While it is true that most entrepreneurs know all the details of their business and have everything stored in their head rather than on an app or software, as it is easier and more foolproof, it is crucial to document everything. It is necessary to have a system and process to help you better handle your money and avoid surprises that could be fatal for your accounts. Proper bookkeeping can also keep you in the good books of the revenue agency.
This seems simple and obvious, yet it is often underrated. It is crucial to be honest about the expenses you are likely to incur. Are there any major expenses coming up that you should budget for? It would be best to have a good grip on the spending capacity and any upgrades you may need regarding office equipment, software, staff salary etc.
Keep Track of All Expenses
This is the basis of bookkeeping. Keeping track of all expenses can be challenging but is necessary since you can use it to claim tax exemptions and other related things. Using a business credit card for all payments can be an easy way to keep all business-related costs in one place. You can also write details about meetings with clients, lunches or any events you may organize to help you substantiate expenses when you are audited. Keeping track of your car mileage and costs associated with long-distance travel for business purposes is also extremely useful.
…And Keep Track of All Deposits
Don’t assume that you can check your bank statement when you need to. Note down all deposits you make. How you choose to record your deposits is your choice, whether you note it down in a notebook, an excel sheet or a financial app. Remember that you will make various deposits throughout the year, including loans, sales revenue, personal income, etc. Having records for each of these deposits means you won’t have to pay tax on any money that is not technically income.
Be Prepared for Tax Season
Tax season is something you will have to deal with, no matter what. It is always better to be prepared for it and have everything ready to deal with the taxman. Be systematic in your approach to taxes and put money aside regularly. Unpaid taxes can bring about issues later.
Invoices Are Important
Keeping an eye on invoices is essential to the smooth running of your business. Billing should be monitored and have a strict process for unpaid bills. Unpaid bills should be treated urgently and tracked with phone calls made to clients, a second invoice issued or levying penalty if the account remains unpaid for a long duration. Overdue bills can hurt your cash flow and thus end up hurting your business.