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Smart bookkeeping to save money

folder30394905.jpgBusinesses are required to keep books in order to pay their taxes and ensure the business is being properly run. Business owners often hire an accountant to handle their bookkeeping and taxes; however you can save money by doing it yourself. Here are some easy ways to save money on bookkeeping:

Keep records of your invoices
If you are still doing your invoices on paper, it's time to switch over to the computer. Input every single invoice you have into a financial program like QuickBooks. Keeping track of your invoices will help you separate the past-due invoices from the current ones and it is much easier to find the customer in a computer database than on paper records. Having all your invoices will also help you track where every dollar earned is at.

Not only do you need to track your customer invoices, you must track your purchase order invoices. A purchase order is typically received from your suppliers. They will ship you the product based on a purchase order (estimate) that they fax or email to your company. Once you receive the product, you must pay before the expiration date on the purchase order or face a late fee. Keeping track of all your invoices will help you make your purchase order payments on-time and it helps you maintain a positive cash flow.

Most software programs come with a system to analyze your debt-to-income ratio. You will be able to determine if you are making enough money on each sale and if you need to increase the costs of some of your products in order to make back your investment amount.

Transactions
Typically businesses will fail because they are unable to control their cash-flow. Your cash and bank transactions are vital to your business. Having record of your transactions will protect you if the bank makes an error or if you forget to input a transaction into your ledger. Make a note on each transaction if the money is coming in or going out. Depending upon how big your company is and the software you use, you can code each of your transactions so you can quickly find all your deposits and expenses.

Recording your transactions will protect the business from spending more than it earns. This is typically called double-entry bookkeeping. It may seem like a hassle, but it is one of the best ways to protect your business from financial disaster.

Collections
As stated previously, cash-flow is vital to the business. Most business owners do not realize how much money they are losing on past-due invoices. If you have tried to collect on a past-due invoice and you aren't making any progress consider using factoring. Factoring is a method to collect on past due debt and help your business grow. You will sell all your invoices to the factoring company for a small fee. They will give you all the money today for each invoice you have and it is then their job to collect the money that is past due. Factoring is a great way to cut costs and keep your cash flow positive.

Records
Finally, you must keep good bookkeeping records to properly pay your taxes. Since businesses must pay quarterly taxes, it is vital to your company to update your books on a daily basis. If you fall behind with your taxes, the IRS will come after you for tax evasion and either give you a large penalty or literally close your business. Instead of using an accountant to handle all of your bookkeeping, try using QuickBooks to help you track everything and stay ahead of your taxes and business expenses.

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