3 bookkeeping tips for small business owners
On average, small business owners spend 10 hours each week recording, organising, and processing financial transactions – everything from accounts receivable and payable, to employee payments, expense receipts and supplier invoices.
While the process may be time-consuming (and tedious!), effective bookkeeping is the foundation of sound financial management – which in turn leads to business success.
But are you feeling overwhelmed by mountains of paperwork and complex calculations? Here are three bookkeeping tips to help ensure a healthy financial future for your small business:
1. Track expenses
Accurate and consistent expense tracking is crucial for claiming tax deductions and lowering your overall tax bill. Plus, analysing expenses can offer crucial insights into spending patterns and the overall profitability of your small business.
Small business owners should consider using a mobile app for simple, consistent expense tracking. Options like Expensify, Receipt Bank and AutoEntry help do away with manual data entry with automated functions, including:
- Receipt data capture via your smartphone’s camera
- Synchronisation with your phone’s GPS to track mileage of business travel
- Importing bank and credit card data, plus integration with accounting software
2. Systematic invoicing and filing
Efficient invoicing is about more than ensuring you get paid in a timely fashion. An invoice is an official record of the terms of each transaction and must be completed accurately to avoid errors in your bookkeeping process.
Here are a few tips for professional invoicing:
- Ensure each invoice includes all the important details: contact information, a tracking number, a detailed list of products or services rendered, and a breakdown of the total amount due
- Provide an electronic receipt to reduce waste and create a “paper trail” if there’s ever a dispute
- Maintain an invoice-filing system that records when you sent the invoice, to whom, when payment was made, and any reminders sent out
An online invoicing tool can streamline this aspect of your bookkeeping process and provide an efficient backup filing system.
3. Save time with accounting software
With Making Tax Digital (MTD) nearly upon us, businesses are required to keep organised and timely financial records. However, manually posting income and expenses to ledgers and journals is time-consuming – not to mention stressful for the math-averse.
We recommend saving some time (and stress) off your weekly bookkeeping by using an all-in-one cloud accounting software solution like Xero, QuickBooks Online or FreeAgent, which will help you on your road to MTD compliance.
Online bookkeeping offers numerous advantages, such as:
- Instant reports and real-time insights on profits and loss, customer accounts, payroll – and your overall financial “big picture”
- Simplified data entry so you can collate invoices, purchase orders, and payroll much faster than with manual methods
- Improved accuracy through automation (once data is entered, the software handles all subsequent calculations and processes – including invoicing)
When it comes to accounting, vigilance is the key to mitigating risk and ensuring the long-term profitability of your small business. Be sure to set aside regular time to update and review your books to catch any red flags and ensure your finances are on track.
Bonus tip: ask for help!
Most entrepreneurs are passionate about developing new business ideas – not crunching numbers. Invest in effective bookkeeping and you’ll build a solid foundation for a resilient, forward-moving small business.
At MHA Carpenter Box, we believe cloud technology is often the ideal way forward for businesses. Our cloud accounting team has specialist knowledge and can provide a range of services, including system implementation and training.