Best Bookkeeping Practices for Small Businesses
Best Bookkeeping Practices
Successful business owners need to maintain their bookkeeping. Proper bookkeeping is an integral part of ensuring the business remains successful. Without it, you may not know how much profit you are gaining and how many expenses you incur. Plus, poor bookkeeping makes it difficult to accurately file taxes and can lead to business failure. Many small businesses prefer a professional bookkeeper, such as Ash CPA. Our firm is staffed with knowledgeable professionals and has over 20 years of experience. Nevertheless, if you decide to go at it alone, below are the best bookkeeping practices for small businesses.
Maintain Routine Inventory Audits
With regular inventory audits, you will be able to determine the exact amount of products. This is because some of the products may be missing due to theft by employees or vendors not delivering the correct amount of goods. Regular inventory audits will be able to highlight all the products that you have in your store. It will also enable you to keep the right amount of product in the store, creating more space for you in the process. Regular inventory audits will also allow you to analyze your sales and prevent overstocking of nonperforming products.
Follow-Up on Your Invoices
Always follow-up on all of your invoices. Some clients are quick to make their payments, but others are not. The invoice could have been sent to an incorrect email or address. Other times, the client may not have read the invoice or marked it for payment. Therefore, keep track. Always follow-up on all the invoices sent, especially those that are over 30 days due.
Separate Business and Personal Expenses
You should not only keep track of your business expenses, but you should also have a separate account for the expenses incurred by the business. In addition to that, have a separate credit card for your business as this will significantly make it easier to file your taxes and be eligible for all business deductions.
Avoid Tax Penalties
By not paying the quarterly taxes on time, the government charges a penalty for all late remittances. You will pay more with the option of waiting till fall to remit your taxes as it will accrue penalties. All these can be avoided by saving a certain amount every month and paying the taxes quarterly. This will help you avoid evading or accumulating taxes while at the same time stabilizing your finances all year long.
You may be faced with a situation where a piece of equipment that is vital to your business breaks down or requires repair or maintenance, yet you may not have the necessary funds to fix it. This may slow down business for you and lead to losses that could have been avoided if you saved some money for such situations.
You may take a loan for such; however, setting some money aside will be more viable as it will come in handy without extra charges. Another workable solution is opening credit lines that can be used for operating expenses and act as an emergency fund source.
Create End-Of-Year Accounting Checklist
Having an end-of-year accounting checklist helps not only to prepare for taxes, but it is also critical to the long-term growth and success of the business. It will also give an insight into the business performance at the end of the year and will help you make more informed decisions to be more profitable in the coming year.
Ash CPA offers a wide range of solutions to help businesses of all sizes and dynamics succeed. Speak to us today to learn about the best bookkeeping practices. Call (617) 462-6651 or book an appointment online. We proudly serve Framingham MA and surrounding towns.