5 Bookkeeping Best Practices for a Small Business
Most small business owners we talk to think that running a successful business involves hard work and loving what you do. While those two things are important, if you actually own a business, you know there are a few more details involved.
One extremely important factor is bookkeeping. Bookkeeping is frequently an overlooked area in small business as it does not hold the flash and appeal that some other areas of owning a business hold.
The good news is when it comes down to it, there are only a handful of things that actually matter. The sooner you incorporate the following five bookkeeping best practices, the sooner you can get back to focusing on working hard at what you love.
1. Not One-Size-Fits-All
Bookkeeping is something that will differ from one small business to another. Specifically, you need to find a way to structure your accounts that makes sense for your unique business.
Far too often, small business owners pick a template that works for others and assume they can fit their finances into this structure. Unfortunately, this practice comes at the cost of efficiency and accuracy, two things that should always be a part of bookkeeping.
It’s fine if you need to revise your approach a bit as time goes on. The important thing is that you come up with an account structure that fits your business like a glove.
2. Organize Your Expenses
Over time, you’ll most likely increase the number of credit cards and checking accounts you use for your small business. The number of expenses will probably increase, too.
Successful bookkeeping for small businesses thrives on consistency. When you look at your books after a year, you should see that the same expenses were paid the same way at around the same time, month after month.
This kind of consistent bookkeeping will make accounting much easier. It can also help identify fraudulent transactions.
3. Keep an Eye Out for Fraudulent Transactions
Speaking of which, you need to recognize that fraudulent transactions are real threats. This is why paying with credit cards is important. It makes it easier to reduce fraudulent payments.
Nonetheless, you still want to be vigilant. Any amount of bookkeeping should involve reviewing records to look for fraudulent practices like:
- Fake Invoicing
- Diverting Payments to Third-Parties
- Profit Skimming
- Misuse of Company Assets
Even if you’re the sole employee of your company, someone else could be using your credit card, so don’t assume your books can go without the fine-toothed-comb treatment.
4. Update and Reconcile Your Books Once a Month
Bookkeeping is something you should be doing once a month at a minimum, especially for a small business.
For one thing, this will help you catch fraudulent transactions before they grow into more expensive problems.
You might catch other accounting problems this way, too. By regularly checking your books, you’ll become far more familiar with how your business spends money, which leads us to our last best practice.
5. Make Cost-Reduction Efforts a Priority
While bookkeeping for small businesses generally only refers to accounting, that doesn’t mean you can’t take this opportunity to reduce your expenses, too.
Get in the habit of identifying where you spend the most money so you can work at reducing that overhead. You’ll have an easy time tracking your efforts because you’ll be checking in every time you open your books.
Entrust Your Bookkeeping Needs to Professionals
Since 2006, Steiner Business Solutions has been handling small business bookkeeping in Richmond, VA. We offer flexible, customized bookkeeping solutions, so you can choose the one that fits your needs best. Contact us today to learn more about how we can help.