Bookkeeping is a necessary, but often undervalued, job that makes a record of all the financial transactions of a company. Accurate, up-to-date bookkeeping is critical to a business's financial well-being, as solid, accurate and timely financial data being vital to help managers to make better decisions. Good bookkeeping practices also help companies to avoid problems like poor cash flow, low profitability and tax audits. Here are some useful tips for good bookkeeping, which apply regardless of the size of a company or the industry in which it operates.
Reconciling accounts — comparing two sets of financial records to ensure they match — on a regular basis helps catch bookkeeping errors and omissions. Reconciliations include bank reconciliation, which compares cash balances and bank statement details with the transactions recorded in your accounting system; and accounts-receivable reconciliation, which compares customer payments to open invoices. Shorter timescales between reconciliations means fewer transactions to review, making the reconciliation task less arduous and time-consuming. Frequent reconciliation also helps to identify potential problems sooner, so that remedial action can be taken quicker.
Invest in accounting software
Accounting software is a must-have for businesses of any size. Basic accounting software keeps financial data organised, accounts balanced and can also automate some tasks, including the ability to link with bank and credit card accounts or to create journal entries from digital receipts using OCR. These added capabilities reduce the time needed for data entry.
More sophisticated accounting software provides even more features, including automated workflows, robust financial controls, and more extensive reporting capabilities. Some solutions, such as NetSuite, extend far beyond support for a company's bookkeeping needs by providing an integrated set of business modules to meet additional requirements as a company grows.
Link bank and credit card accounts
For efficient bookkeeping, link business bank accounts and credit cards to the accounting software. This allows transactions to automatically flow into the accounting system, reducing the risk of manual data entry errors. This capability can be enhanced even further by setting up rules within the accounting system that automatically post bank and credit card transactions to the appropriate general ledger account, saving time and increasing efficiency by eliminating the need for manual entry.
Organise and digitise receipts immediately
It’s a good idea to use digital payment methods whenever possible so that every transaction is captured and automatically fed from linked business bank and business credit card accounts into your accounting system. Where a digital method is unavailable, scanning paper receipts keeps them organised and reduces the likelihood of loss or physical deterioration. Organising and digitising receipts saves time and money and will provide additional benefits when it comes to tax preparation.
Use financial statements
Financial statements provide a summary of a company's financial health and can be easily generated from most accounting software. When used for financial analysis, they highlight business areas that are performing well and those that require attention. It's best to generate financial statements on a regular basis, allowing you to monitor the overall health of the business as well as being useful as a start point for creating budgets and forecasts, allowing you to plan ahead as well as providing historic data.
Categorising and coding transactions to the appropriate general ledger account helps you understand how the company generates income, how it invests capital and whether it's able to pay its debts. Accurate coding is also essential for tax and audit purposes. Assigning the correct code is easiest when the memory of the transaction is still fresh. Entering and categorising transactions regularly also keeps the bookkeeping workload from becoming overwhelming.
Set daily tasks
Setting daily tasks helps control the amount of time spent on bookkeeping and establishes a useful time-management routine. By doing a little bit each day, tasks won't pile up, become unwieldy and cause a time constraint that completely diverts attention from your other daily operations.
Monitor accounts receivable
Keeping cash flowing into a business is critical to its continued health. Constant monitoring of accounts receivable helps to identify when certain customer accounts become past due and require proactive credit control. Timely collections efforts reduce the potential for lost revenue since the likelihood of collecting on past-due accounts deteriorates as they become older. Reconciling cash receipts and accounts receivable on a daily or weekly basis is also recommended.
NetSuite’s financial capabilities makes bookkeeping easier
Bookkeeping can be an arduous, time-consuming and underappreciated activity, especially for small business owners who do it themselves and for whom every pound counts. Embracing automation and using the right accounting software makes bookkeeping so much easier - helping a business to thrive.