Tax filing times are always a rush hour for any business. While some are calm and organized, others may be running around in a panic to sort out all the paperwork. Accounting and bookkeeping are two of the detailed and complex processes in an organization. While earlier, this process was manual and time-consuming, there are digital-based accounting software today which have enabled them to become painless. In the case of small businesses, some of these processes can be neglected and seem like a weight over their head. To file accurate returns and receive the highest deductions, it is imperative that the books and bookkeeping are in the best of form. To do this, it is an excellent idea to prioritize accounting and bookkeeping right from day one. We give you some of the best accounting practices and financial accounting hacks that can make your work a whole lot simpler.
Categorize your expenses
If you are someone who has spent hours on or paid your accountant to categorize expenses, this hack is for you. Ensure that you make categories in your accounting software right at the outset to save time. This is also a money saver because you save up on paying another person to do the work for you. The best accounting software is one that has settings to allow you to set up categories. This means as soon as expenses come in, simply assign them to a specific category. Now is that not easier than trying to remember where the money went much later? Make sure that the categories you make are as per your tax authority. For this you could consult with a qualified accountant so that you get the categorization right. One more advantage of categorizing is that you will be able to find out where you have spent more.
Save receipts with immediate effect
While many businesspeople are clear about their income, others may need to do their homework. A smart business accounting software will ensure that all the payments that come in are credited automatically. However, monitoring your expenses may be a different story. How many times have you seen small business owners fumbling to dig out receipts from pockets, wallets, and drawers? There is, of course, a better way to store and keep these receipts safe! There are free accounting software, online accounting software and even expense tracker apps available today that let you take pictures of receipts and attach them to the expenses part of bookkeeping. This also means they automatically categorize them for you. Choose from the best expense tracker app available. Paper and ink can deteriorate over time, but the photo option does not become illegible. Certain apps also let you do reporting, and some even integrate directly with the accounting software.
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! This is because keeping some time aside for this work will save you a lot of hassle at the end of the financial year. It will not only help you identify any errors right at the outset but also resolve them in a timely manner. 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
This is more for those who manage finances from home or work at home. Having a dedicated space for work allows you to focus and separate your personal and professional lives. Keeping a regular track of expenses is easier than a last-minute rush. For those whose documents are mostly online, make sure it is separate from your personal documents. This way, important papers will not get lost.
Accounting goals should be measurable
Set tangible goals; this is one of the most important rules of successfully running 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. There are financial accounting software, which generate automatic reports. These will help you analyze and make the best decisions 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 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.
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
Ultimately, financial management is about planning, reviewing everything thoroughly, and consulting an expert when needed. Bettering productivity of your business can indicate the difference between success and struggle. Good financial hygiene will give you more time to do what you love and allow your business to grow. You will also be more organized, and less overwhelmed, come tax season. You will also be m knowing that your personal assets are secure, and things are smooth. 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. Dedicate 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.