There are a lot of factors that go into running a successful small business, and one of the most important is one that many small business owners (especially those who are just starting out) overlook: bookkeeping.
Precise bookkeeping is an absolute necessity for running a successful business. While, yes, it may seem daunting, the truth is, if you don’t have your numbers right, you could potentially lose a lot of business—or worse, your business could flop.
The following are numbers you are going to have to keep track of in order to run an efficient business:
Cash In and Out
You need to know how much money you are spending and how much money you are making. Every business needs to spend some degree of money, but if you don’t know how much you spend, and you aren’t keeping track of how much you make, you could end up putting out more than you take in. Keep track of your cash in and cash out figures so you can keep a firm handle on your spending, and so you can have an understanding of how much profit you are making.
Nobody likes paying taxes, but they are one of those evils that are a part of life. The HMRC requires business owners to supply documented information about gains and losses. This information will help them determine how much you owe in taxes. If you don’t pay your taxes, or if you misrepresent your income, you could end up in serious trouble.
Tips for Effective Bookkeeping
Now that you know the benefits of effective bookkeeping, you may be wondering how on earth you are going to go about actually keeping your books. It is actually a lot easier than it sounds. Keep these tips in mind, and you’ll be on the road to good bookkeeping:
- Plan for Expenses. As a business owner, you have to be aware that there will be times when big expenses come your way. For example, you may have to upgrade your entire computer system, or a major component you need to run your business may break down. Don’t let such expenses take you buy surprise; instead, plan for them. Put an emergency fund aside that you can pull money from when needed. Keep this emergency fund in a separate account from your main business accounts so you don’t calculate it with your main expenses and profits.
- Keep Track. It might sound silly to say it, but in order to keep good books, you have to keep track of what you are spending and earning. Keeping track will also allow you to stay on top of potential business write-offs, which could save you a good deal of money.
- Monitor Invoices. Pay attention to your invoices. If you sent out an invoice and you don’t receive payment within a certain amount of time, follow up. If you don’t receive payment, take action. Late or unpaid bills can have a negative impact on your business’s success.
If numbers aren’t your thing and you are heading for the hills after reading this, don’t; you can get help. Make use of a financial software program, which virtually automates your bookkeeping. Alternatively, you can opt to hire a professional bookkeeper to do the job for you.