In this article, we will explore and outline the beginner’s guide to bookkeeping and bookkeeping advice that you should not ignore.
Use a Separate Bank Account for Business
Never mix your personal and business transactions using the same bank account or credit card account. This only causes confusion later on, and not to mention a lot of headaches when going through your accounting when the time comes to do your books. If you are currently using your personal bank account and credit cards for your business, you should open separate business accounts after you have finished reading this article!
A lot of banks have inexpensive business checking accounts and no-fee credit cards you can get ahold of for your business. If there is anything you take from this article, let it be the fact that you should get separate business bank and credit card accounts.
Try Not to Use Cash Whenever Possible
Paying for your expenses with cash might be an easy option, but it makes things more complicated later for your bookkeeper. Paying via cash makes it hard to record all of your business expenses, and if you are missing out on expenses, then that means you may pay more in taxes. For example, if you go out and buy some office supplies with cash, the only record you have of it is the paper receipt, which can get misplaced very easily. Then, when you go to record your bookkeeping, you will be able to see all of the transactions from your bank accounts and credit cards, but your cash purchase will not show up. There is also the risk that you might not remember to record your cash purchases.
Use your business credit or debit cards whenever you can. Even if you misplace your receipt, you will always have a record of the transaction in your bank statements. Plus, if you use a credit card, chances are you will be racking up your rewards points, which makes it a win-win situation.
Keep Things Simple/Chart your Accounts Accurately
If you have got a straightforward business where all you need to do is track your revenue and business expenses, then you probably should not go with a system with all the extra bells and whistles. It is best to just keep things simple. It is very possible to do all of your bookkeeping in a spreadsheet.
In addition to keeping your accounting simple, you should also keep your chart of accounts just as simple. For example, if you have a vehicle, simply use one expense account for it instead of separating them into fuel, parking, repairs, registration, etc., unless it is essential to divide them up. If you need to make a new account to record a transaction then be sure you know why you want to separate it.
Some of the most commonly used and important accounts that a small business should be consistently keeping a record of include:
- Revenue
- Expenses (the money you or your associates put into your business)
- Accounts Receivable (The money customers owe your business)
- Accounts Payable (The money you owe others – i.e. vendors, suppliers, etc.)
- Payroll expenses
- Purchases
- Profits
Using your chart of accounts appropriately will only help in keeping your transactions accurate and on track!
Practice Good Budgeting
Preparing and, more importantly, adhering to a budget will help you set aside money for things that your business needs. The biggest example that we can provide is taxes. You know when you will have to pay your taxes. Budgeting and setting aside some money every month will help your cash flow when your tax bill arrives. It will sting much less, trust us!
Some other items that you can budget easily for are expenses such as maintenance, repairs, supplies, purchases of additional inventory. Once this habit of budgeting is established, you will see your business grow as a result of good planning. The idea behind it is similar to conducting a risk assessment where you think ahead for your business and record any expected or potential expenses that might arise in the near and distant future and then budget for it!
Use Technology Smartly
Technology is a great tool for helping us do things better and more efficiently. But, do not use technology just for technology’s sake. It has to have a good use in your business, and it needs to make things easier, not more complicated.
Discussing this matter with a certified accountant will also help your business, and the experts at Oasis LLP will provide you with all the right information. Whether you need bookkeeping services or a corporate tax accountant, we do it all, so if you are searching for reputable accountants near you in the Markham, Vaughan or Richmond Hill areas, contact us today!
