Small Businesses Should Check For These 4 Problems Now
Small business bookkeeping can create lots of headaches. Regardless of how minor or terrible the issues might be, though, you need to get on top of them as soon as possible. You should check now for bookkeeping concerns in these four parts of your small business.
Recording and Classifying Expenses
It is close to impossible to know the state of a business if you don't record and correctly classify expenses. Even if you're unsure how to record expenses, start doing the work now. You can usually ask a bookkeeping professional to help you classify them as long as you have them. Once you take a few turns classifying the expenses with their help, you'll be ready to handle the job on your own.
Segregation of Personal and Business Accounts
Many small businesses emerge organically from personal endeavors. Consequently, people aren't always clear on when something stops being something like contract work or a side hustle and becomes a business. This can lead to the habit of mixing personal and business accounts.
As it becomes clear that you have a fully functioning enterprise, segregating the accounts is best. Ask your bank to help you set up business checking accounts. If you need to invest your personal money into the business, try to do this as a one-time transfer. Likewise, as you take money out of the business, set the transfers up as distributions or paychecks. Your bookkeeping will be much cleaner this way, even if your business operates as a sole proprietorship with no employees.
Accurate and Up-to-Date Records
Tracking down accurate and up-to-date information is critical to competent bookkeeping. You should always have accurate and current records regarding employees, vendors, clients, and customers. Send annual requests for updates to all parties too. If you're uncomfortable doing this out of the blue, you can send a card during the holidays as a pretense for the update.
Budget
Until you set a budget, you can never be clear about whether you're running a profitable operation or not. A small business should set a budget at least annually and possibly quarterly. Include the big financial line items, such as utility bills, mortgages, rents, equipment costs, and payrolls. Treat each budget as a puzzle, and the point of solving it is to achieve profitability without tinkering with the bookkeeping. Budgeting will help you spot liquidity issues early so you can adjust finances and processes promptly.
Contact a local bookkeeping service to learn more.
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