Organizing business accounts is an essential practice for any investment, irrespective of the size, and keeping your business accounting organized right from the start pauses a challenge.
Accounting becomes difficult for your small business if you take it as tedious and intimidating, but spending time organizing the way you do your business accounting helps you save time. Also, keeping your books provides clarity on how your business is performing. The most challenging element of a business involves managing finances and balancing expenses and revenues for high productivity. The following are some of the ways to keep your business accounts organized.
Keep Personal and Business Accounts Separate
Personal funds sometimes help you to keep running your small business for a few months, and there is no harm in dipping into your private funds to run your business. However, when using a personal bank account for business, it can be challenging to manage the two. Having a distinct bank account for your business needs makes it easy for you to control your expenditure.
Choosing to use your personal account for business purposes may cause you overlook relevant business transactions, so make sure that you correctly separate your personal and business finances. It merely means you set-up separate credit cards and checks accounts associated with both. This ensures that all business accounts used are for business-related costs.
You should also rely solely on credit cards for business transactions. This is because the credit card statement provides you with an automatic and easy way to track the expenses. You should also void cash payments as they can bring challenges when it comes to receipt management.
Focus on Receivables
Getting paid is an exciting part of running your business, but you should still make sure you manage your receivables. Whenever you issue an invoice, record a debtor by noting that a particular client has a specific invoice to settle. Check the listing regularly to confirm if any of your clients have unsettled invoices pending on your records. When you get paid by a customer, apply the amount to their invoice, and mark them as paid.
Sometimes accountants leave customer debts to be reconciled automatically when the client settles that specific invoice. This shouldn’t be the case for your business because some clients may choose to pay some invoices and leave the rest pending.
Pending invoices can bring you severe problems during taxation. It piles up your revenue in the form of customer deposits that don’t reconcile with your real receivables. As a result, you will waste a lot of time trying to combine the two accounts. In the process, you can end up paying extra taxes leading to higher debts. It is essential to make a point of tracking all your transactions.
Hire an Expert
Many entrepreneurs try to do accounting independently to save some money, but you should hire a tax professional to manage your accounting, so you can avoid higher costs or expenses in the future. Accounting experts ensure that your taxes are correctly monitored, keep you updated, and prevent unwanted deductions from your business money in the future.
For instance, when faced with an IRS levy release in your account, you want to have a professional to guide you and provide you with the required information to manage your bank account. When you miss a deduction that you qualify for or underpay your bill, it leads to penalties. Professionals have the experience, and they understand all the steps. They can give you tips to put your business in a legal and straightforward position. They can also advise you on how to maneuver the fluctuating tax regulations that might come your way.
Apprehend Double-entry Bookkeeping
While accounting has moved from physical books to accounting software, to practice of double-entry remains. This means whenever you purchase an item for your business, have to record not only the expense but also what is earned from the same deal.
For instance, if you buy a phone for fifty dollars, you will have to record negative fifty bucks on the balanced sheet you use. However, if you are using double-entry to keep your books, you’ll write plus fifty dollars for the inventory again. This style of accounting presents all money leaving your account and can be used for tracking your transactions.
Practically, accurate account keeping is not an easy task. As your investment grows, the process becomes more stressful, but thankfully there is technology to help you. So, use tech-based tools that fit your accounting demands and make sure you keep your receipt digitally or physically. Ensuring that all your business accounts are appropriately done and organized, lends you enough time to focus on your business growth and maintain your financial situation.