Effective bookkeeping for small businesses
Bookkeeping is one of the most essential tasks to make your business run successfully.Basic bookkeeping consists of keeping track of your cash transactions, purchases, and your sales. Yet many small business owners fail to realize the importance of effective bookkeeping. Failing to keep on track with your small business' finances, has lead to the downfall of many companies. There are many different aspects that you should be aware of when setting up bookkeeping. Here is what you need to know about effective bookkeeping for small businesses-
- Bookkeeping software is where it is at-Regardless of whether you can or cannot hire a professional bookkeeper to help you properly manage your books, you need to find a good software program to use. There are many great software programs to use, that provide you with the invoicing, sales tracking, and other things you need to manage your books effectively. Keep in mind that the software you use must be simple to understand,and it must have the ability to easily generate reports for your marketing department to use. Depending upon the software needs you have, quality software will cost you anywhere from $100 on up. You should also look for a program that also includes payroll,if you do not plan to outsource payroll.
- Know your business size-It is important to pick a software solution that is designed around your business size. This is important since there are many software programs that are designed for large businessesand they will include far too much information and unnecessary things that can waste your time and money. Once your business starts to grow, it's a good idea to hire a bookkeeper to mange your books,or to outsource your books to another company to manage them.
- Manage your income and expenditures-One of the main functions of bookkeeping is to create a summary of income and expenditures. This is essential to your business since, keeping your incomes and expenditures up to date, will allow you to see how much money you have coming in,and hoe much money you have going out of your organization. Keep in mind that electronic ledgers are your best option,as they can be changed easily to fix any needs that suddenly arise. You should also keep a file of your receipts,as you may need to access them, in the event that you are audited. You should keep the receipts organized so you can find them in a timely manner,if you are audited and you need to reference them.
- Don't overlook bank reconciliations-You should keep in mind that in order to make sure your books are being kept up properly,you need to reconcile it with the bank once and awhile. Some bookkeepers like to reconcile daily,while others prefer weekly or monthly reconciliations. The timing isn't as important as making sure you are watching your books,and your bank account to prevent overdrafts and mistakes,within your bookkeeping method. As a manager you need to do bank reconciliations to keep your bookkeeper honest. This is the best way to prevent fraudulent activity from occurring.
- List your inventory-You may be surprised to learn that part of bookkeeping lies in your ability, to watch your inventory and your assets. You need to know exactly what you have and what it is worth. You should keep an eye on the inventory levels,and so you know what is going in and coming out of your office and warehouse. Some bookkeeping software has an inventory tracking program,you can use which will help you keep an eye on your inventory.