Balancing the account books may not be the priority of a small businessman today but is much-needed to make decisions for tomorrow. Without doing it, no one can choose to expand their business or do bulk-buying or even hire new employees. So, irrespective of how many critical responsibilities you need to fulfil, you have to be regular on your accounting tasks and keep the books balanced all the time.
In this article, I have enlisted a few tips that can help you maintain the books and never halt the growth of your startup. But, first understand quickly, why the task of book balancing is important.
- To evaluate the financial health of a business
- To assess the possibility of future expansion
- To qualify for a business loan
- To monitor any fluctuations
Now, let us move onto the tips and tricks to avail the advantages.
#1 – Track your receivables
Receiving money is an exciting part of the business, but managing it isn’t. Generally, when a sale invoice is issued, you record it as receivable which means the customers has to pay you immediately or at a fixed date. Until then, it portrays an outstanding balance. Hence, it is important to pay close attention to your receivables. Don’t postpone the reconciliation of your customer deposits; there can be complicated outcomes of doing so.
#2 – Look at your cash flow
Keeping your expenses and receipts updated is utmost essential for a business to understand its cash flow. The more you assess the numbers in front of you, the easier it is for you to manage them. So, maintain a monthly cash flow statement to get a better insight into the cash movement of your business. That is not mandatory but helpful if you have started new and want a broader idea as to how your business model is generating results. You can choose automated bookkeeping for that matter.
#3 – Maintain expense receipts
New business owners often forget to keep a copy of their expenses, which in return can cause issues with tax, accounting, and cash flow. There can be even instances where you see a payment of a hundred dollar but simply cannot figure out for what it was. So, the only way to avoid this ambiguity is to maintain a receipt of every expense you do. Decide a safe yet easy-to-remember location for them to have quick access when in need.
#4 – Keep business and personal accounts separate
Small firm owners often tend to use their business funds for personal purposes and vice-versa. And while it is not much of a problem in the initial stage, it can become complicated real soon. You need to have a separate bank account for your organization’s expenses. There must be separate credit cards too. For better management, use an accounting app or software. The most recent one that I tried for my business is KIS Books. It is AI-powered software that automates the bookkeeping tasks. It is pretty efficient as it brings all of your bookkeeping and tax preparation into a single platform.