Bookkeeping is the backbone of any business. Business owners must aware of these basic techniques for their business growth. It not only serves the purpose of recording business related transactions but is also very useful for;
- Tracking inventories, assets and liabilities
- Securing investments
- Preventing and detecting frauds
- Preparing and filing income tax returns
- Preparing financial statements, etc.
Every organization should have full control over their bookkeeping and accounting process in order to take informed financial decisions. However, they are not all equipped with the tools and knowledge of bookkeeping. Many small and upcoming businesses usually fail only because they pay too little attention to bookkeeping.
1. Understand the basics of bookkeeping:
Business owners think that an expensive accounting software or a professional accountant is only required for bookkeeping. Though it is partially true, one must always learn some basic details of accounting and taxation like important standards, rules of accounting and deadlines for filing various taxes, etc.
These little details can help you decide the right accounting package for your company and/ or help you hire the right professional accountant who can cater to your business needs accurately.
2. Separate personal and business finances:
It is very important to have separate bank accounts for business and personal finances. Doing this helps the organization to track business-related expenses and ensures that they carefully account the cash inflows and outflows. It also enables organizations to identify business related transactions, saving a lot of time and making prompt strategic decisions for the company’s growth.
3. Integrate cloud-based accounting systems:
Integrating cloud-based accounting helps owners to access business information from any place. It reduces paperwork and enables quick and easy checking of spreadsheets, complex calculations and generating reports. It enables organizations to communicate with their suppliers and customers as and when needed.
Cloud-based accounting ensures that the invoices are generated and sent online, payments are made and received by the due dates. It has brought an ease of doing business and one must take full advantage of this technology and stay ahead in the race.
4. Create a seamless record keeping system:
A seamlessly smooth record keeping system that can be followed easily helps organizations to carry on their regular activities with utmost ease, as they do not need to depend on a specific person to retrieve necessary information. A good business generates the best results when its records are well maintained.
Recording transactions, maintaining invoice registers, tracking all expenses and receipts properly helps in not only retrieving desired information on time, but also makes the entire audit process easy.
5. Setting reminders for due dates:
Organizations are obliged to pay back to the government and the society where they conduct business. Fulfilling one’s statutory obligation increases the company’s reputation and goodwill. Hence, organizations should set reminders of important due dates and deadlines for fulfilling their liabilities and obligations to avoid disruptions in the functioning of their business operations.
6. Tracking and planning expenses:
Many business owners are unaware of their business expenses. Expenses and cost are a part of the business; however, it is important to avoid those which add little or no value to the growth of the company. Organizations should plan their annual expenses early on and keep tracking them, in order to avoid excess expenditure which would put a burden on existing cash positions and increase the company’s liabilities.
7. Focus on Receivables:
Businesses thrive on cash inflows from sales to produce goods and services. A company may record huge sales but struggle to keep up their business if they ignore the debtors. A proper system should be in place to track the payments receivable and ensure that funds are collected on time as per the contracts with customers. Organizations should periodically do debtors’ aging analysis to identify any defaulting party, and they should take corrective actions to maintain the smooth inflow of cash.
8. Preparing reports periodically:
Every organization prepares reports on a monthly, quarterly or yearly basis to understand their financial position. Regular report generation helps management focus on important business issues that need special attention to bridge any gaps and understand specific trends like increased sales, reduced revenues, increased expenses, etc. A regular evaluation of the financial position of the company helps in making better plans and strategies.
9. Proper Documentation:
It is a known fact that the relevant documents should support every business transaction. Proper documentation includes keeping all receipts, invoices, and documents in an orderly manner. Earlier, all documents were filed separately, but with cloud-based accounting systems, a scanned copy of the relevant document must be attached and kept safe for future use.
10. Preparing Budgets:
Budgets help organizations hugely. They not only help to keep tabs on expenses but also make way for the organization’s growth and expansions. Budgets are prepared taking into consideration past performance and expenses. It allows organizations to focus on sales and cash inflows. Regular review of the budgets pin-point areas of focus and improvement and forecasts any major expenses that need to be taken care of.
11. Plan for Investments:
Organizations that grow and succeed rely heavily on investments. Investing in the right assets at the right time increases the creditworthiness of the organization and they can avail loans and credit from the market easily. Hence, tracking expenses and revenue helps organizations to save money for large investments.
12. Off-loading and outsourcing responsibilities to professionals:
Using advanced accounting software or cloud-based accounting systems solves most of the issues, however hiring a professional or outsourcing the bookkeeping activities:
- Saves time and money
- Ensures completion of all statutory and regulatory obligations without fines and penalties
- Keeps accounts updated
13. Outsourcing payroll:
The payroll section does a wide range of tasks like salary disbursements, generating payslips, employee tax calculations, filing the payroll income tax returns, etc. Outsourcing this function not only saves money, time, effort and recruitment of personnel but also relieves the organization from dealing with employee’s grievances as it is taken care of by the outsourcing team.
14. Make bookkeeping and accounting a priority:
Every organization should give due importance to this function. A well maintained and updated bookkeeping and accounting have proved to bear the best results for every successful organization. One must take time and ensure that the books of accounts are managed accurately to avoid business disruptions.
We are here to help you:
The above tips are very handy for any organization who is struggling with bookkeeping and accounting activities. However, it’s not all so easy for everyone and in case you have any troubles in your bookkeeping and accounting, Diligen is here to offer you the support. At Diligen, we offer end-end bookkeeping, accounting and taxation solutions for our clients. We provide 24x 7 assistance to our clients and ensure that their accounts are up to date. Using the latest accounting tools and techniques, the experts at Diligen help to make your life easy by taking care of all your bookkeeping and accounting needs.