Entrepreneurs keep a lot of financial details related to their business in their heads. Doing so has its advantages: No danger of a system crash that loses all your data, no new accounting software to learn, and you can tweak your budget as often as you need without having to sit down at a desk.
But, when you don’t have systems and processes in place, unpleasant surprises can pop up, goals can be easily missed, and important paperwork is forgotten. Getting a better handle on your money can help you plan and keep up with the long-term goals and maybe improve your profits. It can also help you stay out of trouble with the Canada Revenue Agency.
Here are seven bookkeeping tips for entrepreneurs:-
1. Create a Simple Chart of Accounts
Keep your accounts simple but intentional. Consider the nature of your business and set up only the accounts that you require. Select the correct account type for each amount or transaction to make sure that there are no errors in the resulting financial statements. DO NOT over categorize. Visualize the kind of meaningful financial data you want to see and structure your accounts & transactions accordingly.
2. Keep Track of Your Financial Data on a Monthly Basis
People often think tracking figures on a bi-annual or annual basis can work. But, it doesn’t. Don’t just track the figures annually; tracking your income and expenses on a monthly basis can help you see the trends and spot fluctuations in a timely manner. You can then be able to immediately act on areas that need improvement or invest more where a higher return is expected.
3. Go Digital with the Payroll
Simplifying payroll, bookkeeping and accounting processes by storing your employee records in cloud-based software, and importing hours directly into payroll and accounting software can help you reduce errors.
4. Document and Deduct Expenses That are for Personal / Business Use
If you use something for both business as well as personal use, you can deduct a percentage of the expenses on your tax return, but it depends on how it is used for the business. Document call logs and track your mileage in detail so you can maximize your tax deductions.
5. Prepare for Major Expenses Including Taxes
Forecast and create a budget for major expenses, including tax, bookkeeping and accounting expenses. You can set aside a certain amount each month corresponding to your monthly sales in order to make the process more expedient to settle your taxes. It also wouldn’t hurt to set aside some contingency amount to help ensure that your business will continue operating should unforeseen expenses arise.
6. Get the Right Accounting Software
You don’t want to skimp on the accounting software that you use. These days there are more choices than ever, so businesses no longer have to use the complex accounting software designed for accountants.
There are several options available, so look for an accounting software that best meets your business needs and one that you can actually use. If you are not an accountant by training, then avoid such systems and consider outsourcing the job to small business accounting services.
7. Get Professional Help to Prepare Tax Returns
Entrepreneurs are pulled in a dozen different directions. That is why it makes sense to outsource work you don’t have the expertise or time to do. If you are like most entrepreneurs, you likely went into business to pursue a passion, not to become a bookkeeper or accountant.
Professional bookkeeping services can do more than just ensure your returns are filed on time. A trained bookkeeping and accounting eye can spot ways that your bookkeeping processes and perhaps your business itself can be improved.
So, instead of hurting your head with all the bookkeeping and accounting tasks, consider hiring small business accounting services.
Final Advice: Get Everything Checked
Humans are prone to error, and if bookkeeping and accounting are not your natural skill set, then chances are that you might make an error. It is always worth having someone else look over your books just to make sure everything is in order. Whether that is a friend with a knack for numbers, bookkeeping services, or full-fledged accounting services, it will be money well spent.
