There are many basics of bookkeeping small business owners can learn. Bookkeeping is an integral part of any business. In fact, nearly half of all small businesses fail within the first five years. Often times, these failures were caused by poor bookkeeping or money management. A small business owner’s financial literacy is key in determining long term success. While bookkeeping does not have to be done by the small business owner directly, you should understand the fundamentals to manage your company. In this article, we’ll discuss the basics of bookkeeping 101 for small business owners.
Avoid Using Cash
Small business owners should avoid using cash to understand bookkeeping 101. Recording and keeping track of cash can be time consuming depending on transaction volume. First, determine where and for what reasons you are using cash in your small business. Then, eliminate all cash transactions related to your small business. Instead, use other forms of payment besides cash. Use credit cards to keep track of where, when, and how much you are spending. Finally, validate financial records using your electronic payments when needed. If you avoid using cash, you will safeguard consistency and accuracy for your small business. Avoiding cash is an integral basic of bookkeeping 101 for small business owners.
Automate Daily Obligations
To follow bookkeeping 101, automate your small business finances and daily obligations. First, automate your accounting process, so you will have more time to run your small business. Automation will help you avoid spending hours crunching numbers and filling out spreadsheets. Then, use accounting software as a fast and simple way to automate your basic accounting bookkeeping. Choose a software program that has the right storage, accessibility, and security for your small business. Make sure you find the best automation software for you. Take your time and make a list of critical elements you need for your small business. Automating daily obligations is a simple, but important basic of bookkeeping 101.
Schedule Regular Checkups
You should schedule regular checkups to ensure your small business is meeting the basics of bookkeeping 101. Schedule regular checkups to stay on top of your finances. You should checkup on your finances at least quarterly. Intermittent checkups will allow you to determine trends and patterns. These checkups can help you detect declining or stagnant sales for your small business. Furthermore, checkups can also inform you of an unreliable supplier or shifting market needs. Then, you can improve company function by responding to changes in customer demand. Scheduling regular checkups is an important basic of bookkeeping 101 small business owners should know.
Separate Business And Personal Finances
Separate business and personal finances to fully grasp the basics of bookkeeping 101 for owners. Personal finances should be kept separate from business expenses from the outset. Avoid using your personal credit card for business expenses. Next, sort and label your personal finances from your business expenses to avoid crossover. Then, flag any crossover instances and inform your bookkeeper immediately. This will ensure your personal finances are never tied up with your business account. Certainly, separate business and personal finances to comply with the basics of bookkeeping 101 for small business owners.
Have A Disaster Plan
Have a business disaster preparedness plan for your small company as a basic of bookkeeping 101. You must protect your financial data in case of disaster. First, find an offset location to backup your documents. Use a cloud based storage system to accomplish this efficiently. Then, make sure the cloud system works best for your specific security and protection needs. Finally, authorize a company employee to access your digital records from a secure device. This will allow you to restore your records should they get lost. Make sure you have a disaster plan for your small business.
There are various basics of bookkeeping 101 for small business owners to learn. First, automate your daily obligations so your finances remain in order. Next, avoid cash to ensure accurate and consistent record keeping. Schedule regular checkups to detect trends so you can adjust your business model. Then, separate your business and personal finances to avoid confusion and mistakes. Finally, have a disaster plan in case something goes wrong. Follow these steps to ensure your small business is meeting the basics of bookkeeping 101.