Bookkeeping is an integral component of business finances. Establishing separate bank accounts and maintaining accurate records can reduce liability risks while making it easier to secure loans or investors.
Accounting software allows you to easily create financial statements, track expenses and revenue, make decisions quickly and expand growth potential for your business.
Set up a business bank account
No matter if your business is freelance or corporate, having a separate bank account will help keep your personal and professional transactions separate and make filing taxes much simpler by providing tax forms separately for both types of expenses. Plus, many banks provide extra perks like free credit cards or rewards programs which could prove valuable for your company. Plus having one will also make getting loans much simpler as the bank will recognize your financial history as an entrepreneur.
Opening a business bank account needn’t be complicated or time-consuming. While you will likely require certain documents and information before applying, this process can usually be completed quickly online or in person with minimal hassle. When choosing your type of account – most small businesses begin with checking accounts while other may choose savings accounts or merchant services accounts as their initial solution – make sure that it suits your specific business goals and needs.
As well as being used to deposit and withdraw funds, a business bank account allows you to issue checks in your company name to vendors and clients more professionally than asking them directly for checks to write to you directly. Furthermore, it serves as a place where receipts or invoices received from customers can be stored until being entered into your accounting software program.
Some business bank accounts provide direct integration with popular accounting software like QuickBooks, Xero and FreshBooks – saving time when creating expense reports or balance sheets by not needing to look up transactions in these apps and websites manually.
Track your expenses
Tracking expenses is the cornerstone of creating a budget to achieve your goals. Whether using spreadsheets, an expense tracking app or your bank’s online or mobile banking services, tracking expenses at regular intervals is necessary to accurately reflect spending patterns and make necessary adjustments if needed.
An account specifically dedicated to business transactions will make tracking expenses and claiming tax deductions simpler, while accepting credit and debit card payments will allow customers to easily pay you in real-time and give you a clearer picture of cash flow in your company.
Keep a detailed record of your business expenses to uncover overspending patterns and make cost-cutting decisions. In addition, keeping track of expenses provides an accurate picture of your company’s financial performance during the year; giving an indication if expenses exceeded or undershot budget.
Start tracking your expenses easily by grouping them into fixed and discretionary expenses. Fixed expenses could include mortgage or rent payments, car payments and insurance premiums, daycare costs, health care expenses, utilities (gas, electricity and Internet) as well as debt payments; while discretionary expenses include groceries, entertainment and clothing expenses.
Your next step should be writing down each time you spend money and categorizing it accurately into the appropriate category, such as when purchasing soda from your beverage budget line. Don’t forget one-time expenses like purchasing a laptop or car as well as membership dues to websites or services!
Create financial statements
Accurate bookkeeping is essential when it comes to financial reporting for any business. Accuracy helps manage cash flow, meet obligations and make wise investments. Whether using automated accounting software or maintaining records manually, accuracy must always be ensured for an easy read financial statements from your company.
Financial statements – such as balance sheets and income statements – give an overall picture of your company’s finances, enabling you to evaluate its performance over time. They’re created by consolidating data collected daily during transactions recorded, such as loans or investments applications. Financial statements play an essential role for tax filings as well as loan applications and investments applications.
When creating a statement, it is necessary to start from source documents, including purchase and sales orders, invoices and cash register tapes. Once combined, these records should be transformed into a trial balance – which lists all accounts within your general ledger and their current debit/credit balances – then any necessary adjustments made can be used as the foundation of official financial statements such as profit and loss statements and cash flow analyses.
The Ultimate Guide to Bookkeeping for Business Success is an authoritative resource that details both basic principles of bookkeeping and best practices for recording and maintaining financial data for any company. Written by Cynthia Uzialko, an accomplished certified bookkeeper with more than three decades of experience managing record keeping at both public and private organizations; she’s well versed with both accounting software as well as maintaining accurate manual records – offering expertise such as creating budgets, payroll administration, accounts receivable/ payable administration, expenses tracking and general ledger activities among many more general ledger activities than bookkeeping alone!
Prepare tax returns
As tax season arrives, you want to ensure your business is ready. By keeping accurate books throughout the year and recording expenses and revenue accurately, having accurate books allows for hassle-free filing without an audit becoming an additional stressor – not to mention fines incurred due to misreporting!
Accurate bookkeeping is essential to your business, particularly if you plan on seeking investors or loans. Without an accurate account of your company’s performance, demonstrating profitability or identifying risks will be much harder. With solid bookkeeping practices in place, information necessary for forecasting, budgeting and tax reporting will easily become accessible to you.
Self-employed small business owners need to remember this is especially essential, as the Canada Revenue Agency (CRA) has dedicated additional resources and manpower to compliance programs targeting these entities, specifically looking out for red flags such as revenue discrepancies or large expenses that should prompt an audit. By keeping their books organized, self-employed small business owners reduce the chances of audits while having more time for growing their business.
Experienced bookkeepers can bring a wealth of knowledge to your company’s financial management. They can assist in preparing for an IRS audit and setting up an effective chart of accounts. Tere are many qualified professionals ready to assist your bookkeeping needs – you’re sure to find one suitable for your business soon. You can see how on their website cpaaccounting.biz.
Create a budget
Budgeting is essential in meeting financial goals. A budget acts as a financial plan that estimates how much money will be earned and spent during any given month or year. Setting and sticking to this goal can keep you on track for reaching those financial objectives that lie within.
First, calculate your monthly income including any side hustles or additional sources of income. Next, list expenses such as rent or mortgage payments, utilities charges, food and entertainment expenditures as well as one-off or annual costs – more detailed categories allow for easier understanding where your money is going and ways to cut spending.
Use your budget to compare actual and estimated income and expenses for each month, then observe any trends over time. If actual expenses exceed estimates, making changes might mean cutting expenses back or finding ways to boost earnings.
When creating a budget, it can be helpful to divide expenses into categories based on needs versus discretionary spending. From there you can further subdivide these categories if necessary – for instance grouping monthly bills together or breaking them out further such as utilities and insurance premiums may help make life simpler.
Effective bookkeeping is key for small businesses looking to manage their finances and run operations more efficiently. The Ultimate Guide to Bookkeeping for Business Success covers best practices for setting up an accounting system, tracking expenses and creating financial statements as well as more. Download this free eBook today to discover how better bookkeeping can make your business more profitable; whether running freelance work or managing a small enterprise this eBook will get your off the right start!