As many small business owners tell us, completing their regular business bookkeeping is not high on the list of favourite activities, even when they understand it’s critical to their business’s operation and success.
To ensure you protect your business, below are our top 5 tips to stay on top of your bookkeeping:
1. Reconcile your bank accounts
Reconciling your bank accounts has many benefits. Some benefits include identifying errors and discrepancies, preventing theft by identifying fraudulent transactions and achieving an accurate balance. Another benefit of bank reconciliation is being able to view if there are duplicated or missing transactions. Having your bank account reconciled is also a great way to get a sense of your actual balance and simplifies the process of paying expenses when they become due. Further, it ensures that the money spent on the business matches the amount shown leaving the account. Small businesses should reconcile their bank accountants regularly to ensure that the recorded balance of the business matches up with the recorded balance of the bank. MJJ recommend you reconcile your bank accounts regularly to check for errors and fraudulent activity.
2. Review debtors regularly
Reviewing your debtors regularly is a great way to avoid the disruption of your cashflow. Assessing your debtors and pursuing overdue payments helps to maintain a healthy cashflow and prevent bad debts. It is also important to ensure you are keeping an up-to-date record of your debtors, as this will assist in the management and tracking of which debtors need to be contacted. If you understand a client is having cash flow issues, you may consider negotiating a payment plan with them.
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3. Ensure expenses are entered when invoices are received
Entering expenses into your software upon the receipt of invoices is important for planning your cashflow. As a business, entering your expenses prior to making payment of the invoice is beneficial because it enables you to plan and better manage your cashflow. You can see what invoices are payable and plan accordingly with your own invoicing.
4. Review financial reports at end of month
Reviewing your financial reports at the end of each month is an excellent action to implement. Understanding your profitability can help to plan the month ahead by setting goals based on last month’s results. It is also a great time to review internal processes and efficiencies and look at what is working and what areas need improvement within the business.
5. Set your budget
A budget is an essential part of tracking the financial position of your business. Setting a budget is vital for businesses of any size, as you need to know your numbers to ensure ongoing profitability. How much do I need to make in sales next month in order to cover my overheads and still be profitable? This is an important question that every business owner should be asking themselves when setting their budget. Planning your expected income and spending allows you to allocate funds to other items if and when required, as you should know how much is left for discretionary spending. Things to consider when setting your budget include the time frame, income, fixed costs and variable costs.