Breaking Away From Poor Bookkeeping and Accounting Habits
We have talked much about the importance of keeping and organizing records for your business. You should now know what Omnis can do to help your company run more efficiently. You should also know how we can take some of the day-to-day tasks off of your plate, so that you can focus on actually running your business. If you don’t, then welcome! We advise checking out our services page and then reading this blog on bookkeeping.
This is all great and could be beneficial for your business. However, we also realize that there are a great deal of overachievers who would prefer to keep everything in-house! So whether you are just starting out with a brand new venture, or whether you are just looking to brush up so that you can maintain the books for your established enterprise, here is some accounting advise to keep in mind.
- If you don’t have a bank account for your business then get one. This is the easiest way to keep your personal and business expenses separated. It is also an important step if you ever plan on registering as an LLC because these entities are required to have their own separate account anyway. Having a separate business account prevents you from having to sift through personal transactions to compile the financial information needed for your books and for taxes. Chances are that you will eventually have to use personal funds to make a purchase for business purposes, so don’t forget to reimburse yourself.
- Create a budget- Always have a plan of action.It is incredibly important to know where your money is coming from and where it is going. While it is something that many dreamers dread to deal with, a solid budget should actually be freeing, instead of a chain that keeps your funds locked up tight. When you plan correctly you can see exactly what next steps you can afford to make. Here are the 4 basic steps to creating a budget.
- Add up your income
- Determine fixed and variable costs
- Set aside funds for emergencies and unexpected costs
- Calculate your net profit or loss 3. Keep track of your expenses (expensify)- This is a very simple process that many people fail to do, or at least fail to make a habit of. Today it is easier than ever with apps like Expensify, that allow you to take a photo of your receipt and store the needed information. No more messy folders or bags of crumpled up receipts. Keep your receipts. It’s the only way you can prove what you write-off on your taxes.
4. Hire a bookkeeper or plan your bookkeeping practices- Keeping detailed records of transactions and expenses is the most important part of business accounting. In a previous article, “How Can Outsourcing Your Bookkeeping Save You Time And Money?”, we explained some of the basics of bookkeeping and why outsourcing the job can be extremely beneficial for your company. The information from keeping your books well will directly affect business spending, investments, hiring and other decisions. Basically, the simplest way to explain it is that any time money goes in or out of your business account then it should be recorded and the receipt should be saved- either physically or in a mobile app, like Expensify.
Payroll is a specific area of business accounting that we would highly recommend outsourcing, even if you decide to keep track of the rest of your books yourself. Writing checks, withholding taxes, and sending out tax forms is a meticulous and time consuming process. Hiring someone to handle this for you can actually cost you less money when you weigh how much your time is worth and the money you could make by using it effectively.
By keeping these things in mind and combining them with some accounting 101 training, you should be well on your way to healthy accounting and bookkeeping systems for your business!