Only 50% of businesses with employees make it to the five-year mark. One of the primary reasons for this has to do with the financial status of the company.
Business owners fail because they don’t create a profitable business model, control spending, and fund their business. You can avoid all of these mistakes by knowing the bookkeeping basics.
Make sure you apply these seven tips to managing your company’s finances.
1. Keep Accurate Records
The first mistake business owners make is to fail at keeping accurate records. Some new business owners fail to keep any records at all. This is a huge mistake because, without a record, you have no idea where the money is going.
When it comes time to pay taxes, you’ll have to do a lot more digging. It will also be an issue if your business is involved in any legal proceeding.
Establish a system and stick to it. A few minutes each day or week can avoid hours of backlogged work.
2. Review Your Records
It isn’t enough to have all of your records. You need to look at them every once in a while. This will help you identify negative trends or hidden problems.
Scan your records and look for anything that pops out as abnormal. By doing this, you will have a sound understanding of the financial standing of your business.
3. Keep Personal and Business Separate
Never mix your personal and business finances. This can open you up to personal financial liability. Mixing them will also make bookkeeping a nightmare as you try to sort out the different expenditures.
4. Avoid Using Cash
You should have a record of all transactions. The easiest way to do this is by never using cash. Paying by card creates an automatic record of the purchases you make.
This eliminates the need for you to record payments manually. It also provides you a layer of protection should you pay for a service that you now require a refund for.
5. Don’t Overlook the Small Expenses
These dollar and cent purchases can add up to a significant amount of money. Try to make a record and keep receipts for things like office supplies, transportation, or lunch bought for the office.
6. Automate Processes
Doing things manually leaves a higher margin of error. Plus, you risk receipts aging and becoming no longer legible or lost. Your best option is to automate and digitize your process.
Look for software that lets you scan your receipts into the system. Then it will read them and automatically add the expense to your accounting records.
7. Hire a Professional
You have a business to run; this may not leave a lot of time for learning the finer points of managing your company’s accounting. As your business grows, this task will only become more complicated.
Hiring a bookkeeping service can take this entire task off of your plate. This will ensure that your accounting gets done correctly and gives you more time to focus on your company.
Do These Bookkeeping Basics
If you have a new business, you need to keep these bookkeeping basics in mind. By following this advice, you’ll set yourself up for success by knowing the financial status of your company.
Check out the money and finance section of our blog for more bookkeeping tips and tricks.