Learning to keep track of your books is important for any business owner. Sound financial information makes it possible for them to accurately maintain their books, file their taxes, and make business decisions.
There is a lot of work that goes into maintaining your books and keeping track of your accounts. If you don’t organize everything and accurately maintain it, you can get lost in the paperwork. So here are 9 accounting best practices for your trucking business.
1. Choose an Accounting Method
There are two major accounting types: cash and accrual.
Cash accounting is commonly used by many small businesses. In this method, transactions are recorded once a payment has been received. This method tends to be more straightforward, which is why it’s favored by many small businesses.
Accrual accounting, on the other hand, is a method where a business puts transactions on the books as soon as the transaction is completed, even if no money has changed hands. This is a useful method for more complex businesses that have higher earnings.
If your income and payables are typically completed within the month, the cash method would probably be best for your business.
2. Expense Tracking
For businesses that just started, or ones without too many complexities, a simple spreadsheet will usually suffice for expense tracking. Simply list out your typical expenses (such as advertising, legal, etc). As your business grows, you may need a more complex accounting method or software.
If you’re starting with a spreadsheet, make sure you include the following: vendor’s name, account number, expense type, invoice date, amount owed. In addition, it’s important to keep careful track of all your receipts, credit card statements, and incoming bills. These will help you properly manage your cash flow.
3. Maintain Your Records
Though it may seem tedious and unnecessary at times, maintaining accurate records are important to the health of your business. These records will help you file your taxes and make informed decisions. They’re also key documents for lenders or investors deciding whether to partner with your business.
The IRS suggests you maintain the following for a small business:
- Daily summary of cash receipts
- Monthly summary of cash receipts
- Check disbursement journal
- Business checkbook
- Depreciation worksheet
- Employee compensation records
For accuracy, it’s best to update your records daily.
4. Business Finances are Separate from Personal
Ensure that your business accounts don’t get combined with personal ones. Business expenses should be paid with business funds.
Keeping your personal finances separate from your business will make it easier to maintain records, track cash flow, forecast financial performance, and allow you to provide evidence of the performance for a lender or investor.
Note: for some business entities (such as LLCs), not keeping business and personal finances separate can result in the kind of personal liability you sought to avoid by structuring your business in that manner.
5. Review Your Accounts Monthly
At a minimum, you should balance your books at least once a month. Perhaps more, if you have an active month.
It’s important to make time for reviews of your books, and to check your invoices to determine what has been sent or needs to be sent.
6. Limit Accounts Receivable
It can be uncomfortable, but following up with your customers when accounts are past due is an important task. Doing it in a timely manner helps your company maintain its financial status.
Here are some ideas to limit accounts receivable:
- Have clear and consistent credit policies.
- Take delivery upon payment of your services.
- Require a portion of your payment upfront.
- Make sure your billing is accurate.
It’s good practice to ensure that payments are applied to the proper invoice within 1 business day.
7. Automate
There are many computer programs that can help minimize some of your day-to-day bookkeeping tasks (such as invoice processes, or payroll). Software programs like Clientbooks can be major timesavers for a busy business owner.
If you have recurring payments (such as sales tax, payroll, or estimated tax payments), you may want to set up an account with the government agency in question and link your business bank account to schedule payments.
8. Backup Your Records!
There’s nothing worse than losing your documents when you really need them. Make sure you keep your records backed up to protect you against obvious physical threats, and also against cyber attacks (such as ransomware).
9. Consider Professional Help
As your business grows, you may find the need to hire someone to maintain your records for you. A separate bookkeeper or a CPA can save business owners a lot of time, as well as provide peace of mind to know that your records are being done right.
A professional accountant can serve as an adviser and consultant when it comes to determining the best financial practices for your business.
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