Being a remote accounting firm that specializes in bookkeeping services we regularly work with businesses that need to optimize their bookkeeping functions for better performance. In 100+ cases we have worked on so far, there tends to be a few common mistakes which when prevented could have saved hundreds of working man-hours and dollar. Any small business can prevent these mistakes by adopting a few best practices and with inputs form our accounting experts at Outsourced Bookkeeping we have identified and listed them below:
4 Bookkeeping Practices That Must Be Never Ignored by Small Businesses:
Keep personal and business expenses separate: This has to be the most common and most ignored advice with the greatest potential of derailing bookkeeping operations. As a remote accounting firm, we lost of count how many times hundreds of hours of extra work could have been avoided had business owners kept those expenses separate. There is no high-ROI accounting practice that is simpler than this, because of the following reasons:
- Gives clear visibility into the business cash flows
- Ensure clear documentation for tax-related activities (a big burden for small businesses)
- Saves hundreds of working hours for businesses that are already short-staffed.
- Ensure clear differentiation between business and personal expenses to accrue respective benefits
If you are a business that is starting out we highly recommended this bifurcation for simplified and profitable accounting.
Financial forecasting – Always look ahead: Consistent long-term growth is only possible with the right long-term plan. Financial forecasting that takes, present, past and future is what helps a business to accomplish the same.
So sit and right down the potential expenses that your business could incur in the next 5 years. Facilities and infrastructure upgrade, equipment and personnel requirement – estimate all the requirements according to seasonal ups and downs. Creating accurate financial forecasts will ask you the right questions about your sales, customer growth, break-even period, staffing needs and more. The answers to these questions will pave the way for the right plan and steps that will take you there.
Make business budgets: According to US small business administration, a business that makes annual budgets have a success rate of 25%. But guess what the success rate jumps as high as 50% and 75% for businesses that resort to monthly and weekly budgets respectively.
The study has dug deeper into the factors that contribute to the success of the small business and found that the successful small businesses earmarked amounts for every type of spending activity, successfully leveraged credits for businesses and also conducted regular budget monitoring. No wonder how budgeting a crucial aspect of every successful business is. So aiming for smooth business operations that ensure success? Make budgeting a critical aspect of your financial management.
Ensure the right invoice management:
Accurate financial forecasting and efficient business budgeting are only possible when you adhere to the right bookkeeping practices and prompt invoice management is where it all begins.
Lax and late invoice management are critical for every business that wishes to avoid common business mistakes which could cost dearly. For example inefficient invoice management:
- Delays payment to vendors, banks and suppliers which is the most efficient way to spoil the relations.
- The late payment fees and other consequences can interfere with essential responsibilities like utility payments and payroll for small businesses.
- Late client invoicing will also increase the dependency on shareholder funding and bank financing.
As the business grows, the need for the right invoice management grows which is why businesses need to lay a strong foundation for robust Accounts Payable and Accounts Receivable practices.
Know the law – Leverage the law: Accounting, bookkeeping and taxes are different from the core business. They benefit the most knowledgeable and skilful experts which is why all business owners must develop adequate knowledge about the accounting standards, goals, local, federal and state regulations, tax provisions and more.
For example, a few basic bookkeeping and accounting practices that must practice by businesses include an accurate record of income and expenses, maintenance of receipt for at least 3 accounting periods and they go on. But not many business owners build accounting knowledge to adopt best practices. Building basic bookkeeping and accounting knowledge can help also business owners understand the best accounting practices to take the right steps towards implementing them without delay.
Businesses can hire the right accounting professionals, tax consultants and specialists to help them optimize their accounting and clinical performance as they grow. However small businesses are better served by remote accounting firms that can provide comprehensive bookkeeping and accounting services, like us at Outsourced Bookkeeping.
Being one of the best remote accounting firms in the business, we offer complete accounting assistance for businesses of all scales and sizes across all niches. Bookkeeping, Accounts Payable, Accounts Receivable and Tax Consulting – we provide a complete spectrum of outsourced bookkeeping and accounting services here: https://outsourcedbookeeping.com/