While bookkeeping might not be the most exciting part of managing a business, it plays a crucial role in its smooth operation. Adopting good habits early on can help you avoid costly mistakes. To help, we’ve put together these five bookkeeping tips to keep your operations efficient.
1. Plan for Major Expenses
Consider the expenses that could come up in the next one to five years. Is it likely you’ll need to upgrade your facilities? Does your office equipment need to be replaced? Remember to account for seasonal ups and downs and how they’ll affect your budget.
By forecasting significant upgrades or peaks in staffing costs, you’ll avoid taking money out of the company in good months and finding yourself short in slower ones.
2. Track Your Expenses
Expenses can be challenging to track. But business credit cards are handy tools that let you track all your expenses in one place. That is, as long as you keep up to date with your payments. Most providers have even adopted a service that categorizes your bill into types of expenses, meaning one less task for you.
To help prepare for audits, it’s also helpful to note clients you meet for coffee, lunches, and events in your calendar. That goes for car mileage, too. When driving long distances to meetings, make sure you either keep track of your mileage or do a calculation with Google Maps to log how far you travelled and the associated costs. This will help substantiate your expenses for your tax records.
3. Record Deposits Correctly
Whether it’s a notebook and pencil, an Excel spreadsheet, or financial software like Sage, make sure to keep track of what’s being deposited into your business bank account.
You’re likely to make various deposits in your account throughout the year. So consider where each deposit has come from to protect against paying taxes on money that isn’t income.
4. Set Aside Money for Taxes
You know you’ll have to pay taxes and when they’re due, so remember to put money aside for them. Unpaid taxes can incur penalties and interest from the CRA, so make sure the money is there when needed.
Whether you save some each month or each time a contract is paid, your future self will thank you.
5. Keep an Eye on Your Invoices
Assign someone to track your billing, as late and unpaid bills can hurt your cash flow. Then, put a procedure in place in case a bill goes unpaid. That could be issuing a second invoice, making a phone call, and even levying penalties such as extra fees at specific deadlines.
Make a plan for clients who are 30, 60 and 90 days late. Remember, every late payment is an interest-free loan that hurts your cash flow.
Manage Your Money
Although you may be used to storing a lot of financial details in your head, it poses a huge risk, and surprises can arise. Getting a better handle on your money can help you make and keep long-term goals, smooth out seasonal ups and downs of your cash flow, and even improve your profits. Plus, it’ll help you stay out of trouble with the Canada Revenue Agency.
How Small Business BC Can Help Your Business
SBBC is a non-profit resource centre for BC-based small businesses. Whatever your idea of success is, we’re here to provide holistic support and resources at every step of the journey. Check out our range of business webinars, on-demand E-Learning Education, our Talk to an Expert Advisories, or browse our business articles.
