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Receipts to Refunds: Small Business Bookkeeping Best Practices
Bookkeeping is a fact of business life. But it's not just a good habit; it's also a necessity for paying your taxes properly and getting loans from banks.
Following a few simple guidelines for bookkeeping can help you grow your business and steer clear of financial and legal trouble.
Any money you spend on behalf of your business should be recorded somehow, whether in a journal, a ledger or bookkeeping software. Categorizing each entry will help you determine how you're spending your money over time. Most software provides a selection of categories and even lets you specify your own.
Provided it is used solely for business, a credit or debit card is a good basic way to track expenses. In fact, your monthly statement is a record in itself.
If you do use cash, be diligent about recording that too. And even after you've documented all outgoing money, be sure to save those receipts so you'll have backup for an accountant (or the IRS) to review.
Stay On Top of Receivables
Late payments from customers can really hurt your cash flow. It's important to maintain good relations with clients, but it can't be at the expense of your business. Have a process in place for payments that are 30, 60 or 90 days late, including follow-up notices and late fees.
If you use invoices, make the most of them by organizing them in a way that's easy to track. File multiple copies, by customer name and by number. Again, software can help you track past-due payments, and some banks offer invoicing solutions as part of their business services.
Get Professional Help
If you can possibly afford it, having an experienced accountant look over your records at least quarterly is money well-spent. Besides freeing up a little of your time, it can also reduce the likelihood of errors.
Having accounting backup is no substitute for solid recordkeeping, though. Your accountant will be better able to help you (and give you better service for your money) if he or she has good information from you. This means you can't just hand over a box of receipts or wait until the week before taxes are due to get your books in order.
If you use bookkeeping software, see what software your accountant uses. Being able to exchange compatible electronic files can speed things up, especially during tax season.
Plan, Plan, Plan
Always be thinking about upcoming expenses. This means tracking regular events like tax deadlines and, ideally, setting aside money for unforeseen events such as equipment repair or replacement.
Whenever possible, try to devote a little time to keeping your accounting records up to date. It can save you a lot of headaches when the crunch of a tax deadline or loan application arises.
More finance tips? No problem: feast on a few more at the Staples Business Hub.