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Small Business Owners Struggling With Bookkeeping

Small Business Owners Struggling With Bookkeeping

Bookkeeping, along with accounting is the language of business and it is the skill that every entrepreneur needs to master when planning to put up a business. There are several reasons bookkeeping should not be set aside even when your business is already doing well. 

Although it can be such a daunting task, it really pays off when you know how to keep your finances in check. Aside from helping you monitor your budgeting, bookkeeping will also help you lodge timely payments. Unfortunately, not every business owner has appreciated the benefits that bookkeeping provides. When success is within their reach, bookkeeping becomes a thing of the past. 

While some manage to cope with the demands of running a business, some just can’t keep up with it. For every business growth comes another opportunity for you to look at your time management skills and when you get sidetracked by other tasks, making bookkeeping the least of your priorities, you may need to redo how your business operates.

Common Mistakes That Small Business Owners Make

Trivializing budgeting 

When there’s plenty of room for advancements, budgeting your spending becomes trivial because you are solely focused on the more important tasks that you think are responsible for your business growth: selling or marketing. Bookkeeping is designed to keep your finances in check. It’s been created so you will have a full summary of your expenditures, income, sales and others. The business budget has four categories and these are fixed expenses, paycheque-allowance, prospective income and variable expenses. You should also set realistic balancing where you prioritize needs more than wants.

Unnecessary Expenses 

Doing some upgrades so you can improve your business’ quality of work is definitely a must, but you need to know the difference between spending and investing. When you invest, you are spending your hard-earned money on things that will allow you to reap long-term benefits. Expenses can either help you obtain current or long-term benefits. Focus on expenses with long-term benefits because even if you have spent much, you can be sure that these benefits have significantly outweighed the cost in the long run.

Underestimating Record-Keeping

Have you ever found yourself totally confused of your business’ financial expenditures? Maybe you are missing out on maintaining records and keeping all receipts? If this is the case, make it a habit to keep invoices in a safe place where you can easily retrieve them when needed. It can save you from losing important records and you will also be more aware of your expenses. It is recommended that you use bookkeeping software that gives you the ability to upload receipts. 

Failure To Separate Personal And Business Bank Accounts

When the money you used for business is the same as the one you used for your living expenses, losing track of your finances seems an easy thing to do. You might think that keeping both under the same account is a good way to manage your cash flow but the truth is, you can easily spend more than your credit limit because you think that you have steady cash flow. You have not prepared for the worst case scenario, which is going flat broke at the end of the month. The money that was intended for your living expenses have been spent on your business expenses. Not a good idea at all. 

3 Fraud Prevention Techniques Every Business Should Employ

Many businesses are losing money because of fraudulent activities. While simply looking at the reports will not easily allow you to spot any fraud, prevention and detection are still essential to reducing loss. There are various types of fraud that can take place in the workplace. They are broken down into three categories: financial statement fraud, asset misappropriation and corruption. Financial statement fraud refers to schemes which involve intentionally omitting or misstating information in the financial reports. It is either the bookkeeper hides liabilities or inflates assets. Asset misappropriation is the type of scheme in which an employee exploits the company's resources. Corruption refers to extortion, bribery and even conflict of interest. In corruption, employees use their influence when doing business transactions only they can benefit from.

1.Inconsistent Financial Report

If you see omissions or misstatement of financial information, this is a sign that something is wrong with your financial statement. While mistakes can be committed every once in a while, committing errors deliberately becomes a fraudulent activity as it is done on purpose. It is important that you review your financial statement regularly so you will know if your bookkeeper is tweaking any essential information on your report.

2. Incorrect Bookkeeping Procedures

Correct payroll guidelines and procedures must be observed. If they are resistant to change and insist on keeping old procedures, the financial and payroll records from previous years must be investigated for any incorrect or misleading information.

3. Misfiled Paperwork

It can be frustrating when you cannot find any essential business records such as deposit slips, payroll records and supplier correspondence. These records should be kept as they are going to be necessary for keeping track of your financial transactions. If they mysteriously disappear, you know that your bookkeeping has got some explaining to do. 

Fraud Prevention

It is important for every business owner to create a reimbursement and expenses policy. For instance, billing your credit cards directly to your company must not avoided. bill them to the employee instead. It is also important to prepare an expense report for each employee and all receipts must be turned in for any business-related transactions. You should also set a daily limit as this will help you control the amount of cash employees spend. This policy imposes stricter rules that will enable you to monitor expenses effectively.  

Aside from the reimbursement and expense policy, you should also review financial records. These records should be complete, if any of the records are missing, you should ask your bookkeeper or the person in charge for explanation. Checks and balances must also be strictly implemented.                                  

How Does Technology Change Small Business

There are many aspects of your business operation that the new technology is changing. Regardless of the aspects, one thing is for sure: the advances in technology have no signs of going slow any time soon. Some businesses have already chosen to embrace the current technology and they have made a great decision because they have already reaped the rewards, while those who choose to keep a legacy system have been left behind.

Cloud Technology

Bookkeeping technology will not be complete without embracing cloud technology. It indeed changes everything by making expansion, collaboration and mobility possible. Gone are the days when organisation fear data loss once computer crashes because now, everything can be accessed using a mobile device. You do not have to be chained to your desk because collaboration happens anytime, anywhere. One of the advantages of using cloud technology is its ability to access resources even outside of the office. While this was still possible in the past, it was an expensive and time-consuming endeavor.

The Proliferation of Mobile

Technology has made it easy for people to find local businesses, shop or share experiences on social media. It is imperative for businesses to improve their online presence by ensuring that the website is also mobile friendly. Most customers would rather use their mobile device for web browsing because they can take it anywhere.

BYOD (Bring Your Own Device)

Business owners and employees are more productive with the use of smart devices. This is because they do not have to be in the office to collaborate or attend in meetings. Even when they are out in the field, they can still be flexible by working remotely.

Collaborate and connect

In the digital age, everything is connected easily. Even in workplaces one does not have to be physically present to stay involved in group meetings. In fact, there are tools that enable collaboration. Regardless of your location, you have the freedom to edit or work with the team. You do not have to worry about working together because everyone stays connected.

Location is no longer an issue when it comes to collaborating on a project. With the new technology, a small business can achieve mobility and flexibility. This is also advantageous to bookkeepers as they do not have to conduct a daily meeting to find out about updates because it can be done using these modern advances in technology. Technology has indeed taken most businesses to the next level.

4 Bookkeeping Tasks You Need To Automate

While it might seem to be surprising, nearly half of today's small businesses still do not use automate essential bookkeeping processes to reduce repetitive tasks. If you are one of the businesses that still spend hours preparing expense reports, you may need to embrace automation to carry out your bookkeeping task efficiently. Here are four bookkeeping tasks that need automation.

Payroll

For small business owners, payroll taxes are considered to be the company's biggest burden. More often than not bookkeepers spend 10 hours or more per month for managing payroll. This means that bookkeepers spend a total of 120 hours per year just for managing payroll. However, the number of hours you spend for payroll taxes can be reduced when you automate your payroll. Aside from cutting down your bookkeeping load, you can also create instant paycheck and calculate payroll taxes.

Expense Reporting

Failing to submit expense reports on time is a violation of company policy. These variables will definitely cost you money and may even create bookkeeping and tax problems in the end. When you automate expense reporting, you can be sure that you will have a streamlined bookkeeping process. The best thing about automation is that you will have the ability to use your mobile devices to automatically snap pictures of your receipts. You can also automatically generate reports and integrate them with your travel bookkeeping to ensure that your travel expenses comply with company policy.

Inventory

It may take days to take inventory but you can cut back on this wasted time by simply automating your inventory management. When you integrate your inventory management with your bookkeeping software, you will have the ability to automatically create sales report, pack list, reduce inventory errors, generate invoices and speed up the reorder process.

Invoicing

You can easily lose track of the individuals you paid and the ones you haven't if you do not have bookkeeping software to automatically generate invoices. Oversights can happen all the time and this can give you a headache as it can result in losing money and cash flow problems. Make sure you use bookkeeping software so you can generate invoices that you can print or email. While waiting for the payment to come in, your bookkeeping software can provide an automated system so you will be able to sustain sufficient cash flow. This will also allow you to work in conjunction with your bookkeeping software so you can select an outstanding invoice and request corresponding funds over a specific period of time. Automating your invoicing system can ensure that the payment is deposited into your account as early as the next day.

How To Keep An Eye On Your Cash Flow?

Business owners often neglect cash flow without realising its importance. There are businesses that fail to survive because of poor cash flow management. Although it does not take a large chunk of your business’ financial aspect, it will still have a negative effect once you do not pay serious attention to it. Bookkeepers and business owners need to work hand in hand to maintain a balanced cash flow.

There are two kinds of cash flow: negative cash flow and positive cash flow. Negative cash flow occurs when incoming cash is less than the outflow of cash. This only means something is wrong with the way you handle your cash flow. Positive cash flow occurs when the cash flowing into your business is greater than the amount of cash leaving your business such as salaries, monthly expenses and accounts payable.

It is also interesting to note that profit does not necessarily equate to cash flow. There are other financial figures that must be factored in before cash flow can be obtained such as inventory, accounts payable, capital expenditures and debt service. When it comes to cash flow management, a business owner needs to be focused on the drivers of cash. It is not enough that you concentrate on profit or loss because you also have to know what happens to your cash.

However, a business will not generate profits without a positive cash flow. You need to have enough cash so you can pay your suppliers and employees. A positive cash flow will only occur if you structure your business. Structuring your business will involve planning in advance and making sure that you avoid unnecessary spending.

Ways To Improve Your Cash Flow

Collect receivables:  receiving and processing your receivables can still be improved when you ask customers to preauthorise checks. This way banks will have the ability to draw against their accounts following timed intervals. It will also be a good move if you ask your customers to pay using depository transfer checks as this is a cheaper type of fund transfer. Another way to encourage timely payments is giving discounts to those who were able to pay their bills quickly.

Tighten credit requirements: although it is common for most businesses to extend credit to their customers, it is also necessary to determine the risk of extending credit. You may need to take a few things into consideration such as their ability to repay the money they owed. Check some references and accept credit cards. Although it may cost you a percentage, it is still a safer bet for getting timely payments.

Increase sales: attracting more customers is an effective way of getting more cash. However, there might be some challenges in selling your goods but you can make more sales by selling cheaper goods to existing customers.

Why Hire A Bookkeeping Service?

Small business owners often consider hiring a bookkeeper costly, but they realise the importance of a bookkeeping service when the business’ financial aspect is in chaos. A savvy business owner will consider hiring a bookkeeper to focus on other front-end activities. While this may not seem practical at first, a business owner will find a bookkeeper useful when everything is placed in proper financial perspective.

Benefits of hiring a bookkeeping service

•    It saves time.
When it comes to data entry, accuracy is important because the financial statement will serve as a basis for bookkeepers to know the direction the business is heading. If figures are not clear, you will have trouble ensuring that your records are accurate and clean. It is important that you keep records of the book. When a bookkeeping service is available to take care of these tasks, not only will business owners prioritise front-end activities such as maintaining a positive company image, generating sales and strengthening relationships with vendors there is also a greater peace of mind knowing records are in good hands.

•    Professional help is provided.
Relying your bookkeeping tasks on professionals will give you an assurance that important tasks are well taken care of. As a result, you will no longer have to worry about filing tax returns because you are confident that your records have been handled by a qualified bookkeeper. You can also be sure that you obtain a certain level of professionalism and expertise.

•    It saves money.
Every cent counts for a small business owner. Unlike established companies, cash flow is limited for a small business. One of the ways that small business owners do to save money is to cut corners even if the financial aspect of the business is greatly affected. However, when you cut labor costs, you may also be compromising on the quality of your daily task. If you have a full-time bookkeeper, you will no longer have to think about bookkeeping since there is a qualified individual who can efficiently do the job.

•    More focus on the task at hand.
Although many businesses tend to multi-task, there are still some drawbacks in multitasking that small business owners need to take into consideration. Since the business owners cannot give 100% of their attention to the client, financial and administrative matters are often overlooked. When professionals take care of bookkeeping tasks, financial matters are handled efficiently. Small business owners no longer have to worry about missing out on important details of bookkeeping.

•    Things get done professionally.
DIY bookkeeping may not give you the best results you are looking for. Although your intention is to save money for your expansion, you may not be able to achieve this goal if there are irregularities in your financial activity. A bookkeeper will see to it that things are done correctly.

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