It is not easy being a business owner. There are so many things to keep track of daily, and it can be challenging to keep it all straight! Although you may not enjoy it, keeping the books and doing the accounting is an essential element of running a business.
Simple rules or procedures can be implemented by any small business to improve internal financial management and, by extension, decrease stress levels. If you own a small business, here are some suggestions by Bookkeeping services in Atlanta, GA, for better bookkeeping and accounting practices:
- Separate your business and personal spending.
It is recommended that one maintains strict boundaries between one’s professional and private life. Personal and business expenses on the same credit card or bank account can be a significant hassle at tax time. Distinguishing between transactions, especially after some time, might be difficult. This opens the door to erroneous or deceptive accounting and an IRS examination.
- Keep everything organized to avoid “The Curse of the Other Spreadsheet” and chaos.
Avoid what is called not so fondly “The Curse of the Other Spreadsheet” when it comes to your financial records. A lot of us have a lot of customers who require help with their finances or bookkeeping, and they usually find the missing data on that “other spreadsheet” that got lost. Instead of trying to keep track of numerous different spreadsheets that will be used to offer backup to your financial statements, record the specifics of each transaction in the books.
- Be sure to file away your receipts.
Whether you are running a little eatery or a high-tech company, you must document all business expenses. While it may sound easy to place them in a folder or shoe box and get to them later, this will do you no favors regarding tax season.
- Keep tabs on your receivables and payables.
In contrast to the list of clients who owe you money, which is found in Accounts Receivable (AR), Accounts Payable (AP) comprises the bills and payments owed to your suppliers. Keep your AP and AR working well to avoid utterly inaccurate readings. Everyone likes to stay out of the chaos.
- Use the Principle of Agreement
The Matching Principle specifies that expenses or revenue should be recorded in the same accounting period.
- Cut back on the reimbursements.
Reimbursing owners or workers for too many business expenses raises red flags and increases the risk of costly tax mistakes. As a result, the company’s tax return and the owner’s or employee’s tax return may incorrectly reflect the transaction, resulting in a taxable income to the owner or employee.
