- Posted by Alaia Williams
- On June 25, 2014
If you have your own small business, you may need to organize and look after the finances of the business. Maintaining excellent financial records will ensure that you are aware of the money coming in and the money going out of your business account. Bookkeeping. There are reasons to maintain accounts; to help you run and mature your business but also to comply with tax laws.
How to manage and mature your business
Correct bookkeeping lets you:
- Compare your estimations with your figures at the end of each month to assess your business’s economic state.
- Examine your costs to establish how to manage the business more inexpensively.
- Find out your most beneficial customers or products and discover ways to grow your return per customer.
- Receive an advanced warning when you might be running into money problems – this can help prevent a crisis.
Bookkeeping and tax requirements
- You have to show investors, the bank managers and the IRS how things are running within your business.
- You’ll need to retain information and records for certain periods of time as they will be needed to do your tax return or to make any claims.
There are numerous ways to maintain financial records:
- By keeping the books manually
You can purchase reasonably priced bookkeeping systems from the majority of stationers. However this method of bookkeeping takes time and is not suitable for producing reports.
- Design a spreadsheet
Some simple spreadsheet skills are required to guarantee the spreadsheets are error free .
- Let your accountant take care of your bookkeeping.
It might be a costly solution to pay a professional, when you could probably do it yourself. However it can also save you valuable time that will allow you to work more effectively on other aspects of your business.
- Personal business package on your computer
There are a variety of software programs to help you with accounting. Explore and find the one that is the right fit for your business
Set up an easy bookkeeping system:
However you choose to store your records, there are a few certain things you must do:
- Have two files for your invoices, one for purchases and the other for sales. Assign a sole reference number to every invoice that is coming in and going out, make sure to note it on your computer or in your books.
- File the invoices in the appropriate order. Doing this will help you find paper work fast if there is a VAT or tax assessment.
- Maintain records of your expenses and make sure to get and keep receipts. If you are VAT registered, it is crucial to keep the VAT receipts, otherwise you cannot reclaim the VAT back.
- In one part of your cash book, log the money you have paid. Record your expenses. Assign another column for the money you collect and keep a record of each transaction. Divide your expenses into columns for example utilities, rent, insurance etc.
- At the end of each month add the totals of each column and bring them forward on to a new page for the next month.
Outsourcing your bookkeeping can save you money and free up valuable time, allowing you to mature your business without the hassle of hiring staff. If handling the books isn’t for you, delegating is always a great idea.
Carlo Cretaro is a freelance blogger and social media consultant working on behalf of BJ Kenny Accountants who are a leading accountancy firm based in Dublin.