Maintaining accounts for any business is by no means an easy task. Even small businesses, irrespective of their size, pose a challenge because it is difficult to keep track of bills, expenses and sales altogether.
Small businesses are often a one-man show, which often leads to a hodge-podge of things, making bookkeeping and tracking transactions is pretty tricky. It is important that small business owners possess at least basic accounting knowledge so as to manage their business better.
The following tips will help for efficient bookkeeping and maintain proper books of account:
First and foremost, one must determine whether the business will be maintained on a cash system or accrual system of accounting. The cash system is where the transactions are recorded as and when money changes hands. Anyone with a fundamental understanding of accounting can maintain a cash system of accounting.
The accrual system, on the other hand, is a little more time-consuming and requires slightly advanced knowledge in accounting to be able to pull it off successfully. Under the accrual system, the focus is more on recording the transactions as and when they take place, irrespective of whether the money has been received. The focus is on the transaction or event rather than that of cash changing hands.
The following questions are relevant to the mode of accounting:-
Once all these questions have been answered by weighing the respective pros and cons, one can make an informed decision and thus reach a successful conclusion.
More often than not, small businesses tend to operate and undertake all their business activities through their personal bank account. This leads to a considerable level of confusion while preparing the books of accounts, the reason being the difficulty in distinguishing between personal expenses and business expenses. A lot of time and money is wasted on a problem that can be completely avoided.
The solution to the same is to open a separate account for business transactions. This enables the owner to keep better track of the transactions and regulate his expenses on a consistent basis and in a manner that saves time.
The method of receiving payments, whether through cash, bank transfer or UPI, needs to be established and maintained on a consistent basis. This helps keep track of the sales in an easier manner. Considering the convenience of UPI payments in today’s age, it is always better to offer that option to the customers so that timely payments are received.
The advantage of getting an instant notification on the transfer of money through UPI is a blessing to many small business owners, who in the past have suffered losses due to the numerous bad debts accumulated.
Accounting software these days provides you with the option to generate bills and invoices, which describe the mode of payment opted for by the customer for each individual bill. As a result, tracking and sorting bills has become a lot less complicated and less time-consuming.
In order to be able to balance the books effectively and improve business, it is vital that the owner keeps a constant track of the expenses incurred. This helps the owner regulate the outflow of cash and thus avoid wasteful expenditure. Moreover, this serves as an absolute blessing during the calculation of tax liability. Bills, invoices, bank statements etc, are various sources of documentation that can help one track the expenses in an efficient manner.
Never put off until tomorrow what can be done today. This proverb can be well understood, taking into consideration the activity of recording and bookkeeping. Often, procrastination can hinder progress. It also tends to become a habit before you know it.
Considering the fact that there are various accounting softwares in the market today, it would be advisable to invest in one so as to manage bookkeeping in a timely manner. The software allows the owner to record the transactions on a real-time basis and thus eliminate procrastination.
Consistency is the key to achieving better results, no matter what the activity. It is essential for small business owners to maintain books of accounts on a daily basis and in a systematic manner so as to ensure better tracking and regulation of business activities.
If the bookkeeping services have been outsourced, it is important that the books are reviewed at least once a month, if not weekly, just to ensure that they’re being maintained in an accurate and consistent manner.
Bookkeeping today is not as hard as it once used to be. Technology has played a significant role in ensuring convenience and ease of doing business when it comes to the various account tools that are made available. The life of small business owners is better in the present world provided they make use of all the facilities available.