7 Tips on How to Balance the Accounting Books for Small Businesses

Accounting is one of the most critical, albeit the most time-consuming and tedious, aspects of running a business. Balancing books is necessary for a wide variety of reasons. It helps ensure that the company has enough capital to continue the business. It is also necessary with forecasts, such as hiring new employees or determining the potential for expansion. And it helps you avoid tax-related penalties, secure investors, and get loans from banks, among other things.

Indeed, accounting is not something you should leave at the back of your mind. Many companies consider buying accounting software to improve their processes, but there are tips that can help you balance books more effectively in any method. To elaborate further, consider the pointers below.

Separate Personal and Business Funds

One of the primary rules of business accounting is to keep your personal and business funds separated. It is not uncommon for small business owners to use their own money in the first few months of running a company. However, you need to keep the two separated to not only make balancing books easier, but also for the reports to give an accurate idea of where your company is financially.

Start by setting up a separate bank account, card, or e-wallet designated for your business. By doing so, it becomes easier to check deposits, expenses, and other transactions in the company.

Always Record Your Expenses

Tracking your expenses is vital in computing your business’s net income. Without an accurate record of how much a company spends on supplies, payroll, and other expenses, it is difficult to ascertain how much a company earns and how much it has to pay for taxes. Hence, always ask for a receipt and record the transaction’s details in the appropriate books.

Distinguish Between Invoices and Receipts

There are several important documents to track in accounting, but two of the items that several business owners confuse are invoices and receipts. Invoices refer to bills that you issue to customers when you have offered your services but have not yet received payment. Meanwhile, a receipt is given to customers to show that a transaction is complete. Simply put, an invoice indicates that the transaction is still ongoing while a receipt is proof that the transaction is finished.

Mixing up these two documents leads to inaccurate numbers, mismatching balances, and unreliable financial reports. Hence, you need to distinguish between the two each time you log your transactions in the corresponding journals.

Keep Your Finances Organized

Organization is crucial to practicing effective accounting. Properly label your journals, put them in the right order, and place them in a designated spot. Without proper organization, it becomes easier to lose crucial financial documents like receipts and checks. Taking the time to make sure that everything is in its right place can help you avoid mistakes and make it easier to accomplish accounting tasks.

Hire a Professional for Taxes

Guidelines for taxes often change and evolve, and not all small business owners are aware of these changes. Not following these new rules can cost your business a lot of money down the line, whether it is due to missed deadlines or unknown exemptions. Hence, hiring a reliable tax professional can be a considerable investment come tax season.

Communicate with Your Accounting Team

Staying on top of your finances is a must for every business owner. Thus, you need to regularly communicate with your accountant and bookkeeper about any news, changes, or issues that may potentially affect the company later on. Another part of effective communication is asking for clarity if there are terms or numbers that you do not understand. In this way, you and your accounting team are on the same page on the company’s financial health.

Use Accounting Software

While traditional accounting may be enough for you in the early days of the company, the number of transactions inevitably increases as the business grows. To keep up with the rising numbers, technological support becomes an indispensable tool for accounting operations. Advanced developments such as accounting software, point of sale technology, and ERP systems have made it possible to automate several tedious processes, saving time, labor, and capital for the company.

Overall, balancing the accounting books does not always have to be an uphill battle. With consistency and proper organization, the balancing process becomes faster and more efficient. If you are seeking to give your accounting processes a boost, consider partnering with ANSI.

Having collaborated with numerous businesses for over three decades, ANSI is one of the most reputable systems providers in the Philippines. We bring experience and expertise to the table and aim to help you improve your company operations, including your accounting processes.

For more information, contact us today, and let us assist you in finding the right accounting system for your company.