Accurate bookkeeping is crucial for all types of businesses. Still, it is often overlooked by many business owners, especially when they are struggling with other duties, such as maintaining and managing day-to-day operations. However, bookkeeping and accounting should never be overlooked because unorganised books can result in mistakes for the company. When bookkeeping mistakes occur, they can prevent growth and result in uncertainty in the company’s future success. By reaching out to an accountant and bookkeeper melbourne, you can be sure to have organised business books and accounts.
How to balance business books with bookkeeping?
Keeping business books balanced helps in many things, such as predicting the financial position in the future and closing on past periods. It gives you a clear insight into the financial health of a company and brings possible issues to the front so that they can be handled properly. We have shared some tips to help business owners keep the books balanced so that they can keep their financial position stable.
Accounts receivable monitoring
Everyone loves getting paid, which is the main motivation for running a business. However, managing the rate at which a company gets paid is not an easy task. When a good is sold or a service is used, a company releases an invoice and logs a receivable. It shows that a client owes money and, at that time, has an outstanding balance. When the client pays, the amount is applied to the outstanding invoice. It might seem simple, right? Well, it is. However, when there are a number of invoices being released by a company, it can become difficult to monitor them all.
Avoiding the bank reconciliation statement or leaving reconciliation at a later date can leave room for error. Keeping track of receivables, recording financial transactions, and considering switching to an automated process a great first step to keeping the business books organised.
Monitor expense receipts
For example, you notice $100 charge on a bank statement, but there is no evidence of what the charge is for. Then, what? You won’t be able to track expenses. Facing this type of situation can bring a wide range of accounting, tax, and cash flow issues. The best way to prevent this from happening is by keeping receipts from all purchases made. It may seem like a lot of work, but it is the easy way. If you log them into accounting software, it will make reporting and reconciling them much easier.
Whether you are making small purchases or bigger ones, every expense must be tracked and recorded properly. Thorough expense reports can help during tax time and remind you to pay attention to the significance of keeping receipts so that there will be accurate records.
Separate business and personal expenses
For small and medium-sized businesses, it can be easy for business owners to use business accounts for personal expenses. While sometimes using personal funds for business purposes might not cause any harm, it is vital for a company to have its own business account. When you reach out to a professional accounting firm like ours, you will be advised to use business and personal funds separately.
With this, you will be aware of how money is being spent. It will help you distinguish between business and personal accounts. Business owners of new and growing businesses must be aware of the fact that business accounts are to be used for business earnings and expenses only.
Chart of accounts
For an accurate picture of a business, there should be multiple accounts that offer clear insight into the financial health of the company. Some of the most crucial accounts for a business to track include accounts receivable, accounts payable, sales, purchases, payroll expenses, retained earnings, and owners’ equity. It is suggested to avoid using accounts that create clutter and cause a lack of organisation of business books. Businesses can also split main accounts into sub-accounts to get more details about transactions.
Conclusion
Across all industries and sizes, there is a bookkeeper out there who meets business needs. When businesses get reliable bookkeeping services from us, they can be sure that a bookkeeper takes much of the burden off of business owners when it comes to managing business books.