Bookkeeping and accounting are essential for businesses to maintain cash flow and to keep your business on track financially. Mistakes made from improper financial knowledge of bookkeeping can be linked to small business failures. Keeping good records of your business finances will help to prevent cash problems and make things easier at tax time.
Whether you maintain your finances or hire someone to do it for you, business owners should still have a basic understanding of bookkeeping.
- Revenue and Expense Transactions
Every transaction should be recorded in detail no matter how small. This includes incomings and outgoings as well as where it’s come from and where it’s going. A lot of businesses make the mistake of not separating personal and business transactions but this is essential to maintaining organised accounts. Not keeping them separate will cause confusion and make is hard to track revenue and expenses.
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It is important to record all petty cash transactions. Cash transactions can often get recorded incorrectly which will lead to an inaccurate record of expenses and profit. Keeping accurate petty cash records will help to keep things on track.
Maintaining records of inventory is important to know what stock is being ordered and sold as well as, what may need to ordered in the future. An accurate stocktake of inventory will help to maintain stock levels so you don’t overspend and also find out if items are being stolen or lost during delivery.
- Accounts receivable and payable
Always keep organised records of your accounts receivable and payable. This will help to keep things paid on time and prevent payments being missed. Staying on top of what customers owe you and when the payments are due will avoid cash flow problems. Also, keep track of what you owe others to prevent you or your business from falling into debt.
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When hiring employees you must understand your obligations when it comes to payroll. Payroll can be a difficult process to grasp so using accounting software or hiring a professional will help make the process simple.
- Prep for tax time
Keeping your records organised and your finances in order will make things easier when tax time comes around. Keeping your accounts up to date throughout the year will save unnecessary hassle at the end of the financial year.
Understanding and maintaining your financial accounts will avoid mistakes and confusion. This will also help your bookkeeper stay on track and avoid problems arising in the future.
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