Irrespective of the niche your business is operating in, you’ll need to adopt an effective system that helps you manage and account for your finances. Sure, the initial acquisition costs may be a little steep at first but your business will thank you for making this crucial investment.
In many ways, accounting serves as the pillar of your operations as it provides a reference point for your daily transactions. It offers that much-needed perspective into your expenditures thereby enabling you to manage and track your money.
So, how do you make accounting easy and interesting? This article shares five simple ideas to get you started:
Adopt a bookkeeping system early
The number one rule to good accounting practice is to have a bookkeeping system at the startup phase of your business. This system helps you record, categorize, and reconcile your daily transactions accordingly thus assisting you track cash flow in the long run. In it, you should record business expenses, cash inflow, unsettled debts to your suppliers, debtors’ balances, and other related accounting transactions. If you have no idea how bookkeeping systems work, here are three options available for you:
This method involves using dedicated bookkeeping software like QuickBooks, Microsoft Excel, or Wave to record your business finances.
This method entails employing a part-time accounting practitioner who checks into your books occasionally. For accuracy, it’s important to have a record of your transactions either from your business bank or credit card company.
Often adopted by big companies, this method involves employing a full-time bookkeeper to record, manage, and reconcile business transactions on a daily basis.
Separate business and personal expenditures
Although your business may be the main source of income, it’s important to have separate personal and business accounts. The simplest way to go about this is to open a new bank account where you’ll store the income from your business. By keeping the two accounts separate, it becomes easy for you to distinguish and track the cash flow accurately.
If you’re a sole proprietor, remember to also record in your accounting books any amount that you transfer from business to personal account. Alternatively, have separate credit cards so that personal expenses are charged from personal account and business expenses from the business account. While at this, be sure to compare fee structures across banks available in your region. Business accounts attract additional charges and require your business to have a registered name.
Use dedicated accounting software
When using software-assisted accounting, it’s important to settle for programs that are primarily designed for the purpose. In the wee days of your operations, transactions are easy to track using simple tools such as Excel or handwritten books. However, as the business grows, maintaining control over records becomes challenging meaning you’re likely not to be consistent in your bookkeeping.
If you’re at this point, investing in dedicated accounting software like Xero or QuickBooks will save you a lot of headache. And the best part? You don’t even need to have prior accounting expertise to use these suites. Read how Xero and QuickBooks compare to decide which works best for your business setup.
Keep accounting books up-to-date
Even with the best bookkeeping software, if you don’t update records frequently, things might spin out of control incredibly quickly. One of the most effective approach towards making accounting easy is by developing a habit of recording transactions as soon as they occur. You can adopt either of these two techniques:
This is where you record revenues and expenses immediately cash transactions occur. For example, making a credit entry as soon as a debtor hands the amount he owes your business.
Using this method, you’ll recognize expenses and revenue right when the transactions occur whether money has been paid or not.
In modern times, businesses are lucky to have access to technologies that simplify accounting tasks. Today, there are receipt scanners, invoice managers, cloud-based accounting software, payroll systems, tax calculators, etc. All these assist you in keeping your finances in check and organized which is everything in accounting.
Hire a professional
When you have the capacity in terms of budget and you’re not a certified accountant yourself, it pays to employ or outsource the work to a professional. These people have the expertise to do quality bookkeeping as well as the much-needed awareness of accounting laws. They’ll easily track down your periodic revenues and expenses, prepare financial statements on your behalf, and assist you understand how to comply with applicable policies. While at it, make sure the professional you’re calling upon is certified, trustworthy, and affordable.