Every business is obligated by law to keep financial records (bookkeeping) that pertain to its operations. Bookkeeping is instrumental in the sense that it helps keep and track financial records of a business’ financial transactions within a specified period. Effective bookkeeping strategies foster strategic decision-making processes in a business. In addition to keeping a record of your business’ financial activities, bookkeeping further saves time and resources in that your business’ financial records are readily available when needed.
Effective bookkeeping techniques enable business owners to easily analyze and keep track of the business’ financial performance and by extension analyze the financial health of the business thus pointing out discrepancies and issues in the accounts. To this effect therefore, bookkeeping is crucial to the everyday operations of the business and more so in addressing problems earlier on.
This checklist highlights bookkeeping best practices for your business.
1 Select proper business accounting software
2 Avoid mixing personal and business checking accounts
3 Use owner’s draws to pay yourself
4 Avoid spending cash sales
5 Check that all your sales documentations are linked with a specified deposit
6 Use a business check card for your business expenses
7 Ensure your checking account is reconciled on a monthly basis
8 Creative an effective sales tracking system
9 Obtain a separate business credit card for your business expenses
10 Ensure your business expenses are paid first
11 Always run a profit and loss statement for your business
12 Ensure your sales and purchase ledgers are reconciled
13 Maintain an organized chart of accounts (COA)
14 Keep a record of sales and purchases in the ledger
15 Keep regular schedules for financial admin duties
16 Minimize access to your financial records
17 Consider keeping both electronic backups and paper copies of your financial records
18 Track customer invoices and payments
19 Check that appropriate employee and contractor forms are filed
20 Consider hiring a professional
21 Consider using a debit card for all business expenses
Notes:
- Use tools such as Quickbooks, and Xero to optimize cloud-based bookkeeping
- Consider outsourcing to professional bookkeepers
- Leverage tools such as a register tape to track your sales
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