Understanding and monitoring your company’s finances as a business owner is critical to allowing your business to grow. This is why bookkeeping is so essential for any business. If you’re just getting started, the good news is that you can keep track of your finances yourself. If you’d rather devote more time to your core business, consider outsourcing your book keeping to professionals like FastLane.
In this article, we will list 9 bookkeeping tips that help all small business owners to keep track of their business’ financials.
What you will learn:
2.3. Avoid late payment
What Is Bookkeeping?
Bookkeeping is the process of keeping track of a business’s financial transactions, including your business’s sales, purchases, and payments. The procedure should include tracking income and expenditures. Accountants and bookkeepers use spreadsheets to record all of these activities. They may also undertake more complex responsibilities such as invoicing, paying bills, preparing tax returns, tracking key performance indicators, and providing sufficient information for budget and spending planning.
9 Bookkeeping Tips For Small Business
Here are some helpful tips for getting started in bookkeeping for your small business:
1. Keep track of all payments
Make a note of every payment and when they were made or received so you can quickly find them if necessary.
Keep excellent documentation of all your company interactions by maintaining a thorough paper trail. You should keep your investor’s receipts or save the email receipt for your most recent digital advertising buy. You’ll be pleased you kept track of these documents during tax season. This helps you to receive the full tax benefit of declaring legal business expenses by recording all your claims.
2. Choose an accounting method
Your bookkeeping will serve as the foundation for your accounting. It is crucial to decide early which method you’ll use for book keeping, therefore, you should choose carefully from the start. Traditional accounting records income and expenditures at the date of the invoice. Unlike traditional accounting hong kong, cash accounting records money on the date when you actually receive or pay it.
3. Avoid late payments
Make prompt payments and set a payment deadline for your consumers so you can effectively chase them. Take note of any late payers and consider avoiding working with them if they continue to miss payments. It is important to carry out credit control, which would assist small businesses to maintain a healthy cash flow.
4. Monitor variable expenses
We recommend that you track your variable costs on a weekly basis rather than a monthly basis, even though analyzing these costs can be done on a monthly basis.
If you are operating an e-commerce business, seasonality may affect the finances of your business, for example, the allocated budgets in areas like marketing may be affected by seasonality. When it comes to competitive sale periods like Chinese New Year and Christmas, this is when the competition gets tougher and your marketing dollars spent on digital ad purchases will inevitably affect the price.
As a result, you should keep an eye on expenses such as your marketing budget to ensure you are happy with the fluctuation, and if required, take immediate action before the end of the month.
Do you have the funds necessary to continue operations? What’s the current state of your finances? What can you do with that amount of money? To answer these questions, you have to regularly manage your cash flows.
Some business owners may believe that earning a certain amount of revenue implies they have that much money in their bank account. However, your cash flow also includes daily purchases and other company costs. As a result, you must have a firm grasp on your cash flow to enable you to make more sound economic decisions.
6. Organize all bank statements and invoice
Ensure that all bank statements and invoices (purchase and sales) are current, in chronological order, and in your possession. Otherwise, you’ll be paying your bookkeeper for the time it takes to track down and categorize these documents when it’s simple to do it yourself. If some files are lost, you might be fined for late filing.
Keep files for purchased invoices (i.e. money you owe) in one location, separate from files for unpaid invoices and file them both alphabetically by supplier name. Always remember to transfer purchase bills after you’ve paid them.
7. Conduct a monthly review
While you should practice daily and weekly bookkeeping, don’t forget to go through your books once a month. Here’s how to conduct a monthly review:
Examine your costs
Making business decisions might be stressful for an entrepreneur. Use your monthly review to reflect on your company’s actions during the last month and how you might make better use of these expenditures in the future. Consider how you may improve your cash flow in order to ensure that your company runs smoothly on a daily basis.
Take a look at your company’s financial status
You should examine your company’s health as a whole each month to get a better view of the overall picture and how things are progressing for your firm. Ensure that you’ve recorded all of your expenditures, then consider how you’ll make financial decisions from the following month onwards. If you’re in charge of any new campaigns or projections, check them out to see if they influence your costs, sales, or both.
Make appropriate modifications
Every company has a distinct business model, and what works for one firm may not work for you. This is why it’s critical to conduct a monthly review so you can see whether your revenue and costs necessitate a different set of bookkeeping needs. For example, consider if it’s really necessary to log and track each order you get if your company only needs the overall monthly sales. It might be simpler to streamline things and examine monthly sale statistics in your situation.
8. Select your accounting software
Cloud-based accounting hong kong has gained favor among small businesses and start-ups because of its numerous advantages. Many alternatives exist on the market, however, organizations are constantly searching for the platform that best fits their needs. Xero hk is certainly one of the finest and most popular accounting software hong kong given that it offers 5 major benefits:
- Instant financial reports generation for decision making
- Integration with customized applications
- Reduce manual tasks by syncing bank information
- Flexibility in ways like access and analyzing data
- Global recognized secure platform
For exploring more exciting features and updates of Xero accounting software hong kong, visit www.xero.com.
9. Outsource your bookkeeping
If your company is a startup and just getting started, it may be more cost-effective to do your own bookkeeping. Keep track of how much time each week you devote to the volumes as you progress. Determine the time cost spent on doing your own book keeping and compare it to the cost of a bookkeeper. A competent bookkeeper may complete a monthly audit in a few hours, so consider employing accounting services from professionals like FastLane.
How FastLane Can Help?
Fastlane has helped over 1000 clients with diversified services, including auditing, legal, taxation, banking assistance, corporate secretary, company formation and accounting services since 2013. We’ve worked with clients from different sectors, and we’re adaptable and capable of meeting our clients’ complex demands.
As a Certified Xero Advisor and Platinum Partner and experience in using and offering cloud-based accounting solutions, we are confident in offering tailored experiences and high-quality Xero advisory services to help with your business’ accounting hong kong and book keeping, including:
- Xero HK Setup and Training
- Xero Health Check
- Accounting and Bookkeeping Advisory and Catch Up
- Xero HK Implementation and App Integration
If you have any more concerns and questions about bookkeeping and Xero accounting software hong kong, please contact our experienced accountants right now and we are ready to help you!