Top 9 bookkeeping tips for small business owners

Running a small business is a thrilling and challenging endeavour, filled with countless responsibilities and important decisions.

Amidst the exhilaration of building your brand and serving customers, it’s easy for the essential task of bookkeeping to be overlooked or undervalued.

However, maintaining proper financial records and practices is the backbone of any successful business, regardless of its size.

Whether you’re a seasoned entrepreneur or just starting on your small business journey, mastering the art of bookkeeping can save you from financial headaches, boost your profitability, and keep your business on the path to success.

We’ve made it easy with our small business bookkeeping advice and tips. You’ll soon be equipped with the knowledge and strategies necessary to navigate the financial intricacies of your enterprise.

Let’s get started with our top nine small business bookkeeping tips –

Choose the right bookkeeping software

There are several bookkeeping software packages in the marketplace.  But before you start looking around, the first place to start is to assess your business needs.

a) Identify your specific business requirements.

Consider factors such as the size of your business, the complexity of your financial and business transactions, the number of users who need access to the software, and any industry-specific features you may require.

b) Identify the key features you need in bookkeeping software.

This may include invoicing, expense tracking, bank account reconciliation, financial reporting, payroll management, tax compliance, integration with other software or platforms, and multi-user access.

c) Set Budget

Look at the upfront costs, such as licensing fees, and any ongoing subscription or maintenance fees.

d) Research and compare options. 

The popular accounting software packages include Xero (this is what we use at Sleek), MYOB, and QuickBooks. 

e) Test the software’s user interface and navigation. 

It should be intuitive and easy to use.  Look for software with a clean and organised layout that makes it simple to locate and access different functions.

f)  Check its data security

Robust data security measures protect your financial information. Look for features such as data encryption, regular backups, and secure access controls. Cloud-based solutions often offer automatic data backups and enhanced security.

g) Ask your accountant

Your accountant can talk you through the details of the different accounting packages and recommend one that fits your needs and industry.Sleek leverages Xero on a digital platform to bring a customised accounting and bookkeeping solution to your business. 

Organise your business documentation

Maintain a systematic approach to organising receipts and invoices to simplify the process of finding and referencing documents during tax time or financial audits.

Whether you prefer technology and digital tools or hard copy, use these methods to categorise and store your documents and paperwork. 

Digital storage solutions without a doubt reduce clutter and ensure easy access to your documents.   Cloud storage platforms, such as Google Drive or Dropbox, allow you to store your electronic files securely.

Sleek uses a cloud-based receipt app which makes it super easy to upload your receipts straight into your accounting software – not data entry and it files it, all in one transaction.  It doesn’t get much easier than that!

If you prefer physical documents, set up a filing system with clearly labelled folders or binders. Maintain separate sections for different categories of documents, and consider colour-coding or using dividers for easy identification.

Start by categorising your business documents into financial year and logical groups. Common categories include sales records, business expenses, receipts, invoices, bank statements, contracts, and tax-related documents.

Don’t forget to regularly back up your files to safeguard your business documents. Consider using automated backup solutions or cloud-based backup services to ensure you have secure copies of your important documents.

Remember, staying organised with your business documentation is an ongoing process. Regularly review, update, and purge documents to maintain an efficient and clutter-free system.

A well-organised bookkeeping and accounting system for your business will reduce stress (our clients keep telling us!).

Heard about Sleek’s digital mailroom? With our solution, you get to stay on top of all your important company correspondence from anywhere…filed and stored safely in the cloud.  We’ll even help you respond to various government notices!

Keep personal and business expenses separate

The easiest way to do this is to set up dedicated business bank accounts and credit cards to make business purchases and keep personal and business finances separate.

Separate personal and business accounts help you to simplify the bookkeeping process and ensure accurate financial records.  It also helps if you refrain from using personal funds for business expenses or vice versa.

If you’re a small business owner, another way to keep personal finances separate from your finances is to establish a regular salary for yourself. Transfer funds from your business account to your account as a designated salary, just like you would with an employee.

Keep tax deadlines in mind

Ensure you understand the specific tax deadlines that apply to your business, including the applicable federal, state and local tax requirements.

It may be helpful to create a tax calendar (it can be a physical calendar, a digital calendar, or a reminder system) with important dates marked such as quarterly estimated tax payments, filing deadlines, and payment due dates.

Engage with a tax professional, such as an accountant or tax advisor, to ensure compliance and to receive timely reminders of tax deadlines. Companies like Sleek can provide guidance, help you understand your obligations, and assist in preparing and filing your tax returns.

Keep your financial records up to date throughout the year to make it easier to compile the required information when tax time approaches.

Don’t forget to plan for cash flow to anticipate upcoming tax payments and plan your cash flow accordingly. By forecasting your tax obligations and setting aside funds in advance, you can avoid last-minute financial strain and potential penalties.

Stay informed about tax changes by subscribing to official tax websites, and newsletters, or engaging with professional associations in your industry.

Your business can file for extensions if you anticipate difficulty meeting a tax deadline. Be aware though, that extensions generally grant additional time to file, not to pay taxes owed.

Learn to understand monthly bookkeeping reports

Gradually improve your understanding of monthly business bookkeeping reports and use the information to gain valuable insights into your business’s financial status.

Remember, financial literacy is a continuous learning process, so don’t hesitate to reach out to your accountant.

Start by learning the fundamental concepts and terms used in bookkeeping and financial reporting. Understand common financial statements such as the balance sheet, income statement, and cash flow statement. Familiarise yourself with terms like revenue, expenses, assets, liabilities, and equity.

Each bookkeeping report has a specific structure and format. Take the time to review and understand the layout of the report. Pay attention to headers, sections, and the order in which information is presented.

Identify the key financial metrics relevant to your business. These may include revenue, gross profit, net income, expenses by category, accounts receivable, accounts payable, and cash flow. Pay close attention to trends and changes in these metrics over time.

For a plumbing business, key financial metrics may include revenue or sales, gross profit margin, net profit margin, average job or project cost, accounts receivable turnover, and the business’s cash flow.

Whereas for a freelancer, their key financial metrics may include total revenue or earnings, average project or client revenue, profit margin, billable hours or utilisation rate, client retention rate, accounts receivable aging, and overall cash flow.

Comparing the current month’s figures with previous months or the same month in previous years will help you identify any trends in your financial performance or areas that require attention.

HINT!  Correctly categorise transactions to ensure the accuracy of your reports.

Seek clarification when needed from your professional bookkeeper or accountant to explain any unclear aspects.

Stay up to date and outsource if you can’t keep up

Set aside dedicated time each week or month to review and update your financial records. Consistency is key to staying on top of your bookkeeping and tasks and ensuring accuracy in your financial reporting.

If you find the bookkeeping tasks too much, consider consulting with a bookkeeper or accountant to help manage your bookkeeping tasks. Their expertise can provide valuable insights, save time, and ensure compliance with all tax laws and regulations.

We’ve crunched the numbers.  

Sleek digital bookkeeping solutions can give you back up to 8 hours a week.  

Now imagine what you could do with that time?

Keep track of cash payments

The very nature of cash makes it hard to keep track of in a business.  If your business handles cash transactions you will need to set up a process to ensure all business cash flow is tracked and accounted for properly.

You can do this by setting up a clear cash-handling policy. It should outline procedures for receiving, counting, and recording cash payments. Train your employees on these procedures to ensure consistency and accuracy in tracking cash payments.

Issuing printed receipts for cash transactions will serve as evidence of the transaction and helps both you and the customer keep track of payments. Ensure that the receipts contain relevant details such as the date, amount, item description (if applicable), and a unique receipt number.

Maintain a manual or electronic cash journal or ledger and regularly reconcile cash with your sales to identify any discrepancies or errors in your cash handling processes.

Establish internal controls to minimise the risk of cash theft or misappropriation. For example, require dual authorisation for large cash transactions, conduct surprise cash audits, and limit access to cash storage areas to authorised personnel.

Say, you run a café and handle a lot of cash transactions.  You may want to implement a cash register system with individual cashier accounts. Each cashier is assigned a unique login to record their cash transactions separately. At the end of each shift, cashiers reconcile their cash drawer and provide a detailed report of their sales, including the amount of cash received, credit card transactions, and any discrepancies. This allows for individual accountability and helps track cash payments accurately.

Pay your employees on time

Paying your employees on time is crucial for best practices but it helps in maintaining a positive work environment and ensuring employee satisfaction.

It helps if you set up a payroll schedule.  This schedule should outline the dates when employees can expect to be paid. Common payroll frequencies include weekly, bi-weekly, semi-monthly, or monthly.

Next, we recommend you automate payroll processes.  Payroll software or online payroll services work great for this!  These tools can streamline calculations, tax withholdings, and direct deposit payments. Automation reduces the chances of errors and saves time, making it easier to pay your employees accurately and on time.

Ensure you collect and review timesheets, plan for holidays and weekends and follow the legal requirements including minimum wage laws, overtime regulations and payroll tax obligations.

Put aside sufficient funds to cover payroll expenses. Budgeting and financial forecasting can help you plan for payroll expenses and ensure that funds are available when needed.

As your business grows, your payroll will grow.  There are payroll service companies or your accountant can provide this service.  Sleek can include payroll in its accounting and bookkeeping services too.  So, if you’re looking to free up time and want an automated and secure payroll service, call us on +61 2 9100 0480.

Create financial reports based on books

Now that you have organised and categorised your financial transactions using a robust bookkeeping system, you can generate financial statements such as the income statement, balance sheet, and cash flow statement.

These reports provide a comprehensive overview of your business’s financial performance, position, and liquidity. Use financial analysis techniques to interpret the data and gain insights into areas such as profitability, liquidity, and solvency.

Using graphs, charts, and supporting explanations will certainly help to present the information clearly and concisely.

The owner of a barbershop may use his balance sheet as an overview of the barbershop’s financial position at a specific point in time. It lists all the business assets (tools of the trade, real estate, money in the business bank account), liabilities (money owed to suppliers or the tax office), and owner’s equity in the business.

Regularly review and analyse your financial reports to make informed decisions, monitor your business’s financial health, and communicate effectively with stakeholders.

It’s time to change your mindset about bookkeeping.

Bookkeeping isn’t just a compliance requirement, it’s a strategic tool that empowers you as an entrepreneur to drive growth, achieve financial stability, and navigate the complexities of business ownership with confidence.

Leave the bookkeeping to Sleek and get the tools you need to run your business like a boss! Schedule a meeting today so you can start today.

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Frequently Asked Questions

Have questions? We're here to help

Some common mistakes to avoid in bookkeeping for small businesses include failing to separate personal accounts and business finances, neglecting regular account reconciliation, inadequate record-keeping, and overlooking timely invoicing and follow-up on payments.

Small businesses should aim to update their bookkeeping records regularly, ideally monthly or more frequently if possible, to ensure accuracy and maintain up-to-date financial information.

Bookkeeping is important because it helps small businesses track their financial transactions, maintain accurate records, make informed decisions, meet tax obligations, and demonstrate financial health to stakeholders.

Bookkeeping involves recording and organising financial transactions, while accounting involves interpreting and analysing financial data, preparing financial statements, and providing insights for decision-making.

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Disclaimer: The information on this website is intended for general informational purposes only and may not be specifically relevant to everyone’s personal situation. It should not be considered financial advice or a substitute for professional tax or accounting advice. Each individual’s circumstances are unique, and laws can vary. For tailored advice, please consult a qualified professional. Contact Sleek for further information on how we can help you.

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