Accounting and Bookkeeping have always been an integral aspect of each organization irrespective of its size and type. The lack of proper knowledge often confused and complicated things for the newbies especially in those days when bookkeeping was time-consuming & no less than manual labor. However, as technology improved, organizations streamlined their processes & shifted to digital bookkeeping software for bookkeepers. The main goal was to simplify the tax filing process in minimal time possible. Here we list down some of the best accounting hacks that can make your work a lot simpler.
Categorize your expenses
Are you still struggling with the prospect of categorizing your expenses? If yes, it’s time to utilize this nifty hack. Pick an accounting software that comes embedded with default settings to allow you to set up categories. Having this feature incorporated right at the first step helps you seamlessly divide your expenses saving your time.
It makes categorization easier for you since the moment you incur an expense, you can assign it to a predefined category of your choice. You must remember that your categories align with your tax authority. If you’re clueless about it, reach out to a qualified consultant & create your categories. Division of expenses into categories will also help you track where did you spend the highest & what was your lowest expense category.
Save receipts with immediate effect
If you’re a businessman, keeping a track of your expenses is a must. The irony is – Not every businessman knows how to do it. Most of them still rely on bits of paper to write their expenses down, and save those bits in their pockets/wallets, etc. & later fumbling in digging out those receipts. It’s a complete mess and looks unprofessional.
A better way out is to utilize free accounting software, implement online accounting software, or install free expense tracker apps in their smartphones. Pick the best of the lot and get rid of this hassle of remembering where you kept a particular receipt. Click a photograph and save the receipt in your drive or directly integrate your app with these accounting softwares to get quick access.
Link bank accounts and credit cards
Smart business bookkeeping can let you automate several functions. This means you can take advantage of the features in the accounting software, including connecting bank accounts and credit cards. Automation helps pull through transactions and attribute them to your accounting software directly. To ensure this is effective, make sure that the business transactions happen only through business accounts. No personal transactions should happen through this account. The type of files provided by your bank should also be compatible with what the financial accounting software you use accepts. Similarly, you can also connect payment gateways with your business accounting software provided this kind of integration is available.
Do a weekly reconciliation
Good habits often help you in the long run. While several business owners procrastinate, it is important to set aside a little time every week to reconcile bookwork even though it may not be the most enjoyable thing for you! It saves you from unwanted hassles at the end of the financial year.
It will not only help you identify any errors right at the outset but also resolve them on tiem. Another important thing to do is to follow up on all the late payments; more so if your business runs on an invoice basis. Call up people even if they are a day late in making payments. Putting in place clear follow-up processes will ensure that things don’t go out of control.
Pay and settle invoices on time
Not only will paying invoices late harm your reputation, but it will also strain business relationships. Apart from this, late payments will also mean additional fees and eventually, action from the court of law. Also critical is timely billing as it helps maintain cash-flow and gives the perception of professionalism.
Pay your business taxes
Once you have separated your business and personal finances, make sure you understand and pay your taxes promptly. This will help you in further organizing your finances. Often taxes can be the most cumbersome and confusing aspect for small businesses, but the consequences of failing to comply can be even worse. Making sure that you are tax compliant right at the outset will increase reliability on your business and even profits.
Understand business loans
There will be a point when you wish to take your finances to the next level. However, you must understand your cash flows and the capability to pay back in this case. Each business has different kinds of requirements and therefore it is essential to understand the different kinds of loans on offer. This will also help you know if you qualify for the loan and organize all aspects right at the outset. This way you will have a better financial goal to work toward as you build.
Make invoicing automatic
No matter whether you do business within your country or across several places, you will come across different invoicing requirements for every client. This includes sales tax, GST or VAT invoicing requirements; local tax rules; etc. It is important to take into account all these factors because unless you are up to date with all these, you may just end up being penalized for not following processes. The best way is to choose bookkeeping software that manages these invoicing requirements automatically for you. After all, it is impossible to check every invoice that goes out manually!
A virtual assistant for help
If you are too busy to give it your time or if bookkeeping isn’t exactly your strength, it is a good idea to try and find a virtual assistant for help. This assistant will not only be a specialist in bookkeeping but also take care of oversights. In the process, this will help you free up your time for other things. However, there are some things you must consider before choosing a virtual assistant.
- Are you giving access to multiple users? How will your accounting system be used?
- Are they aware of the compliance and rules you need to follow?
- Do they have good references for this type of work?
At times, experienced business owners hire someone called a qualified CPA. This ensures that everything is done correctly right at the outset. Consult your accountant for recommendations to choose good bookkeepers that they already know.
Get on the cloud
Every business is on the cloud nowadays. Cloud-based applications and accounting solutions help increase productivity for small and large businesses alike. This is because they improve functionality and accessibility. The other advantages include the following. They are secure, and you do not run the risk of misplacing records or documents. You can access the cloud platform from any place or anytime. Many software providers offer a mobile accounting app for both Android and iOS platforms. Cloud-based solutions are any day more affordable than other options. Many have subscription-based pricing and zero cancellation fees. Cloud-based software lets you collaborate with other teams from one point. You can add as many people as you wish. What’s more, is that they provide updates on a real-time basis. This ensures that there is no waiting time.
Automate where you can
One cannot stress the importance of the right tools for your business. They help improve productivity and ensure that you have time for other things. Make sure you identify opportunities for automation as this will help you eliminate human error as well. Many accounting software are on the cloud today and open up huge scope for automation. One can seamlessly integrate applications and have better access to payment options. Online financial accounting software also combine both accounting and digital invoicing. This helps businesses stay on top of accounts receivable. It will also automate reminders, so you do not miss out on deadlines. Reconciliation is also simple thanks to auto-categorization, interfacing with banking platforms and error alerting.
Separate your workspace
If you’re pondering upon – how to apply accounting in your life, a great way is to separate your workspaces. Having a dedicated space for work allows you to focus and separate your personal and professional lives. It helps you track your expenses and avoid a last-minute rush. If you’re tech savvy and keep your documents online, keep them segregated in a separate folder (other than your personal folder). This way, important papers will not be lost.
Accounting goals should be measurable
Set tangible goals to run a business. Accounting is usually not one of the aspects of business one considers exciting, and therefore, many people do not set clear goals. However, books and bookkeeping are reliable indicators of the financial growth of any business—and thus, essential. The older your transactions get, the harder it will become to keep track. It is impossible to remember everything, and this may make you miss out on valuable aspects. A commitment to regularly maintain your books will only take a few minutes but brings lifetime benefits. Different financial accounting software generate automatic reports helping you analyze & make the best decision for your business.
Invest in professional bookkeeping or accounting more so if you are someone who gets anxious with the process. Handing them to a professional bookkeeper will boost your productivity and give you more time to do other things. However, do not think that outsourcing bookkeeping means outsourcing responsibility. Involve yourself in the process and know what’s happening with your numbers as well.
Open a separate bank account-
When you think about getting a bookkeeping software for bookkeepers, then you may want to consider a separate bank account. This is done to make it easy for you to keep your bank records in order. This account will be used primarily to keep your business income in place. You must keep your personal and business finances separate, especially if you have a small business. Although it’s not necessary for sole proprietors, it’s a legal obligation for LLCs, partnerships, and corporations to have a separate bank account. Generally, it’s a good idea for small business accounts. This is one of the major accounting/bookkeeping hacks that will help you get a business credit card and build a legit business credit score.
Keep great records
Most small businesses collapse as they fail to manage their records. The bookkeepers need to keep separate bank accounts to avoid purchasing things from personal accounts. Following this practice makes it easier for you to find receipts & invoices, and track your different expenses. To further streamline the process, get quick access, and sort your finances, investing in a cloud-based accounting/bookkeeping software like GIDDH, is one of the most crucial business hacks for 2020.
Make use of good invoicing practices
While we are on the topic of the life of hacks, invoices are so much more than documented suggestions for your customers, they are records of transaction terms. This is why you should pay extra attention to them. There are many ways you can practice good invoicing practices, starting with setting up an affordable cloud-based bookkeeping software for bookkeepers. With this,you can leverage professional looking templates, and present authentic looking invoices to the customers. Sometimes, printing the physical copies can bring about lots of fuss and you will face a real possibility of losing documents. Not to worry! You can use invoicing software to store all your documents on the cloud, which means you can gain access to it anywhere and anytime. Their software will have an expense tracking feature, it will help keep your records in a certain order.
Regulate your taxes
Every small business owner dreads doing their taxes because it can get quite confusing. But, avoiding doing your taxes just because you get confused is not a good excuse, especially when the IT Department comes knocking. Once you sell a product, you will need to add the corresponding GST, depending on the customer’s location. If you’re importing or exporting something, then there will be additional taxes and duties that accompany that. So, another significant accounting hack is to collect your taxes immediately after the sale is made. Stay on top of your taxes, you have to be extremely vigilant.
Be aware of the deadlines
Never be late when filing your tax returns, this is usually the point that causes the accounts of a small business to go off the rails. Your tax liabilities will include filing tax returns and paying bills that are associated, and these elements should not be ignored. To be aware of your tax deadlines, you will have to have all your documents in order. Additionally, you can prepare an estimate of your taxes for the upcoming year and pay them in instalments, instead of paying a bulk amount. These bookkeeping hacks will help you pay your taxes from your business savings account, or use other methods.
Schedule your Profit and Loss statements
Profit and loss statements are great to determine the financial status of your business. They are a great way to get a snapshot of your company’s financial situation during any period. You can set it for weekly, monthly, and yearly reports. Keeping your P and L statements in order and consistent is a major accounting/bookkeeping hack.
Be attentive to receivables
Managing your receivables can be a tough task. When you are recording a receivable after an invoice is issued, you log that a customer owes you money. Checking this listing will allow you to check whether there’s an outstanding balance from your customers. Sometimes, there will be a lot of orders, and applying the amount paid to the invoice and marking them as paid takes a lot of time and effort.
Besides, there are never enough hours in a day to pay attention to every important task, and hence, the deposits from customers are often postponed to reconcile at a later date. When the date of paying taxes is near, businesses are left with a lot of customer deposits in their revenue account that doesn’t match with the report of the receivables. This could result in wasted hours trying to update the listing as well as overpaying of taxes and high debts. Therefore, using a bookkeeping software for bookkeepers to keep track of customer payments every month is an essential life hack that will save you time and money.
Keep learning to manage cash flow better
Education is an important business accounting hack that firms should be paying more attention to. That’s because, the more you understand the numbers, the better you get at managing them. Additionally, make it a habit to produce cash flow statements every time you perform financial reviews over the week or month. Cash flow statements monitor income direction and offer a clear understanding of the movement of cash within the company and outside as well. As they also consider the element of time, you can easily visualize seasonal expenses and payment cycles.
However, you don’t only have to depend on generating a cash flow statement to understand how finances are working in your company. By investing in the right bookkeeping technology, you can get a holistic vision of how cash is moving around in your business model.
Communicate clearly with your accountants
This is probably the most important business hacks in 2020 that you should be applying. Most firms now work with professionals like accountants and bookkeepersto handle their books. There will be a communication gap at times when they are trying to explain something to you. It’s important to understand that you might use some jargon they use confusingly, and you must convey it to them. You are a business owner and having a complete idea about the latest terms of financing is not your job specifically. Your accountants, bookkeepers, and tax professionals are an essential part of your team, who will watch your back and provide you with bookkeeping hacks and accounting tips that you can count on.
Anticipate the future based on hard data
Last but not the least, use your monthly financial report to anticipate the financial trajectory of your business. Make sure that you apply this accounting hack to get a better understanding of your upcoming expenses, legal fees, or tax payments. Compiling a monthly report will help you incorporate new plans if you are looking for company expansion or preparing a budget for new hires, etc. Moreover, this will also enable you to utilize your existing assets effectively and plan out for achieving other milestones in your business.
Managing your accounting well is a step-by-step process wherein one cannot become an overnight expert. However, it is important to learn as you go along and throughout the life of your business. When in doubt, here are the pointers we have mentioned as a summary.
- Separate business and personal finances
- Manage your business bookkeeping and accounting
- Understand and pay your business taxes
- Manage your personal and business credit scores
- Understand your business financing options
Financial management is all about planning, reviewing each aspect thoroughly, and consulting an expert when required. Keeping your finances streamlined gives you enough time to concentrate on other important hobbies without jeopardizing your business growth. It keeps your stress at bay as you’re more organized and gives you the understanding that your assets are secured.
Accounting is only as painful as you make it to be. Streamline processes, put systems in place, and automate as much as possible. This will save time and improve productivity. Dedicating time to reconcile your accounts, even if that is with a virtual bookkeeper, will make all your tasks less daunting and help you realize your vision of taking your business to peaks of success.