Did you know that over a ten year span, small businesses in Canada have a survival rate of just over 42%? That’s one sobering stat right there. But we have good news.
If you are reading this, then the chances are that you’re already primed to be in the 42% of SMBs that make it. Why? Because you are already thinking about one of the key components to maintaining a healthy small business. And that is rock solid bookkeeping. This is why we are going to share with you the best bookkeeping practices. Ones that you can implement for sustainable growth and success in your business.
Read on to find out what these are.
Use Cloud-Based Accounting Tools
One of the hottest bookkeeping tips is that you should be using cloud-based accounting tools. Cloud-based accounting has fast become the go-to option for accounting software. According to research, 67% of Canadian organizations use cloud-based accounting for one or more of their financial functions.
Here are some of the reasons why cloud-based bookkeeping is so advantageous for SMBs:
- Accessibility: You can log in anywhere, any time, from any device. All you need is a web browser.
- Cost-effectiveness: Cloud accounting expenses come in small monthly payments which are more manageable for small businesses and start-ups than large upfront costs associated with legacy systems. Cloud accounting also negates the need for company servers and their inevitable electricity bill.
- Security: Cloud accounting tools are uniformly secure and are not vulnerable to data loss through human mismanagement, such as a broken laptop that was not backed up.
- Scalability: One of the most exciting benefits of cloud-based accounting tools is their scalability. As your business grows, so do your financial needs. There is no need to migrate to larger and upgraded systems.
These key benefits make cloud-based accounting tools a must for any small business.
Separate Business and Personal Expenses
You may have heard this one before, but one of the most important bookkeeping tips is that you must separate the expenses of your business and yourself. The way to do this is to open a bank account for your business and religiously use it solely for business expenses. The same goes for your personal account. Avoid paying business expenses in cash, as this will result in a pile of receipts that you will need to input into the books. If you choose to make a capital investment into your business, then this must be documented clearly. If you wish to withdraw profits from the business for yourself, then you can either set up a monthly salary or make a capital withdrawal.
Come bookkeeping time, you will easily be able to track and input your business expenses into the books. Some software will even allow you to import transactions straight from your bank account. This saves incredible amounts of time, but won’t work out that well if you have personal expenses mixed up in there.
Close Your Books off Monthly
To keep things running smoothly in small business accounting, a best practice is to close your books off every month. This will allow you to analyze performance over the month and help you to plan for the next month.
It will also ensure that your books are 100% up to date on a monthly basis.
Reconciling your bank account promptly is another small business accounting habit that you should implement. As soon as you receive your statement, you can go in and make sure that the balance reflected is the same as that in your ‘Bank’ account in the chart of accounts in your bookkeeping system.
By doing this every month you will avoid tedious sessions of error hunting through hundreds of entries.
Track Income and Expenses Accurately
To save time and hassle, make sure that your expenses and income are being recorded accurately. If these figures are off, you will not be able to generate accurate reports, and you could even get into trouble with the tax man.
Tracking income and expenses accurately can also increase your chances of maintaining healthy cash flow. And guess what? Cash flow is one of the boring secrets to growing a small business.
Get a Professional on Your Side
There are many reasons why small businesses need to work with an accounting professional.
As the owner of an SMB, you are most likely focussed on growth and innovation for your business. Not on forms, changing tax laws and red tape.
This is why you need to get an accounting professional on your side. One that can advise you, save you time, meet deadlines, maximize your deductions, handle audits, and ensure that you are 100% compliant at all times.
Outsource for Efficiency
What’s even better than getting a professional on your side? Getting a team of professionals on your side! Outsourcing your books means that they will be managed by a team, including a bookkeeper, tax pro and a CPA. A bookkeeper can help you grow your business, but outsourcing can make this happen even faster.
With outsourcing, you are freed up to focus on your business’s growth, while at the same time you will receive accurate and timely financial reports to guide you in your decisions. You also won’t have to lose any sleep over tax season, payroll or compliance issues.
According to research done by Deloitte, outsourcing has the power to make businesses more agile, effective, and efficient. So if you want this for your business – and hate bookkeeping – take the opportunity to outsource.
Now You Know About Some of the Best Bookkeeping Practices for SMBs
Bookkeeping is generally one of the facets of running a business that owners enjoy the least. But, it is also one of the most important areas to maintain and keep on top off. Fortunately, you now know about these best bookkeeping practices that you can implement to keep your books hassle-free, and up to date.