How to Handle Your Bookkeeping
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Running a successful business relies largely on how well you keep your books. Understanding your cash flow, meeting your tax obligations, and knowing where your business is doing well and what might need changes all comes down to proper bookkeeping.
What is Bookkeeping?
Bookkeeping is the process of maintaining proper records, analyzing your transactions, and closing the books for each accounting period.
Your records include bank statements, checkbooks, bills, statements, and invoices. No two businesses will have the same records but understanding that you must keep every piece of paper is important.
Why Bookkeeping is Important
Bookkeeping tells you where your business stands at any given moment. You should be able to look at your records and know your accounts receivable and payable. You should also be able to tell what your business is doing well and what might need to change.
With proper bookkeeping, you’ll know your financial situation at all times. You’ll be able to answer tough questions like ‘is my business performing how I want?’ Looking at your books you’ll also know what bills you can pay, what money you have coming in, and who you need to follow up with to satisfy accounts receivable.
You’ll also be more capable of keeping your operating costs under control, seeing where you’re overspending, and finding ways to cut back to increase your bottom line.
Finally, proper bookkeeping makes tax time much less stressful. You won’t have to hunt through shoeboxes for receipts, track down purchases that you can’t remember when you made, or miss out on important tax deductions.
What Should you Track?
A key part of bookkeeping is keeping track of the important data including:
- All cash coming and going
- All money your business is due (accounts receivable)
- Inventory levels
- All money your company owes (accounts payable)
Keeping Records – What Should you Keep and How Long?
Good bookkeeping means keeping track of your finances and holding onto important financial documents.
But for how long and what do you keep?
Any records that pertain to your finances you should keep. This includes receipts for all purchases, statements of all income, bank statements, and expense reports for anything you could write off on your taxes.
Ideally, you should keep all records until you reach the statute of limitations for that tax period. This is the time that you could amend your tax return for said years. You never know when something might come back and need fixing.
Get Help with your Bookkeeping to Run a Successful Business
If bookkeeping isn’t your ‘thing’ and you’d rather focus on running your business, outsource your bookkeeping to a reliable source. Bookkeeping is a vital part of your business and without it, you cannot succeed but doing it wrong could be even worse than not doing it at all.
Let the experts help you in this area so together you can build a successful and viable business.