When you are starting your own business, there are a lot of insecurities that you have in your head. The first and the most commonly occurring is how you will deal with your finances. When you have an investment of a limited amount, then you should be careful about your financial management. This article will discuss bookkeeping best practices for your small business.
If you are new to this side and need to learn what bookkeeping is, do not worry; we have covered you. We will mention everything we can and help you understand it better.
What is Bookkeeping?
For beginners who only know about financial management and not bookkeeping, this is for you. Bookkeeping is basically recording all your transactions. This includes many different things like revenue generated, all your investments, and purchases. There are a few ways that you can do it, so we will mention them first.
Bookkeeping the traditional way:
If you are looking for more of an old-school way of bookkeeping, you can write it all in the notes. Previously, people wrote everything in notes and kept the data secured. Let’s look at the pros and cons of this way of bookkeeping. Well, for small businesses, the best thing about it is that it is inexpensive. With that, you know it is trustworthy because you are doing it alone. The cons of this are that you can lose the data, get all of it removed, and make human errors.
Bookkeeping the digital way:
The second way of keeping your date of all finances is through a digital medium. You can do this with all the software usage and save it. The pros and cons of this medium are that there are zero chances of human error, and you can easily keep all the data. This also is reliable more than doing it manually. The con for this is that it is always expensive compared to the manual way.
Bookkeeping best practices for small businesses:
We will now talk about how small businesses can do bookkeeping that will benefit them and some of the bookkeeping best practices.
Personal and professional finances:
The first and most important thing that all businesses need to learn is to keep their personal and professional finances separate. Unfortunately, what people usually do which causes them harm is they do not know the importance of this point.
When you keep your professional finances together, you mix up where you have spent all your money which in turn causes your problems. If you keep these finances separately, it will help you sort your finances in a better and easier way.
Always use the same system:
The second thing that again people do not do when they are doing their business is keeping the same system for their finances. Now, keeping all the financial data in one account helps you know all the information and keep it safe.
When you keep the financial account the same, you do not have to worry about where much money is. Only switch the accounts when you think it is essential. If you keep changing the accounts constantly, then you might need clarification all the time and may lose half of the detail.
Maintain your reports:
One of the essential things for good bookkeeping is maintaining all your reports. There are three things about it. The first one is to keep the statement of your income. The income statement is basically the amount that you have earned. The second report is the balance sheet. Balance sheets are the necessary sheets that have all your liabilities. The third one is the cash flow statement which tells you how much money has been made to your account and how much you have spent.
When you have all these reports maintained well, it is even easy for the people who are investing in your business. They would know all the numbers coming in and out of your account.
Keep the reviews:
The next most important thing to do is to keep doing reviews of your accounts occasionally. Then, when you keep reviewing everything related to your account, you know what is happening. Ask your bookkeeper to keep all the record properly and show it to you at least quarterly. Then, when the bookkeeper knows you are constantly reviewing all the details, it will also keep them conscious of maintaining the data correctly.
Always hire professionals:
For the next part, we suggest hiring a professional to play this vital role. We know that when you are starting your own business, you have limited finances and are conscious about spending it too. But if you really need to spend money on something, it is always hiring a professional.
When you have a professional on your team, you know they can handle everything well. They will not only manage the finances but also tell you when something is wrong. Hiring professionals like 123 Accounting services, one of the best bookkeeper in Vancouver, Canada for all the small things in your business will keep you and your business sorted.
Always keep the control intact:
Lastly, we want to mention this point which again is really important. You should always have internal control over everything. For example, when making a transaction, you should keep 2 to three people to do it. The first one should write the check, the second one should double-check it, and the third person should make the transaction. This is like setting two-step authentication on your bank details and finances management. These are all the proper steps to take when looking for the bookkeeping best practices of small businesses.