Are you a small business owner wanting to start your financial year off right? Perhaps, take a bookkeeping class or even get accounting software. Whichever stage you’re in, there is a solution. Here are five tips to catapult your financial year to a new level.
Starting your business, a single-entry recording of transactions may suffice. However, while your business is still small, think about doing double-entry bookkeeping (or maintaining a general ledger) instead. It serves as a backbone. You will be thankful for when your business accelerates. All information accrued in one place! From there, you can prepare your financial statement, P&L statement and internal or external audit. You can also easily pick up any errors and frauds.
Revise Chart of Accounts (COA)
You may already have a COA for your business. In maximising its value, create a COA that does not need changes over time. This allows you to compare the results year by year. Hence, take time to revise your COA, add or remove any chart items. A well-designed COA gives you an accurate sense of your company’s financial health. It also helps you to make quick and informed decisions.
File Old and New Statements
While your business is still fairly young, catch up on the filing work of your old and new statements. In general, you will need to keep this for five years from the due date you apply for tax returns. Start the SOP now, to prepare for your business’ expansion.
Practice the CCRRA
If you’re a one-man show, then the CCRRA system is a good reminder for recording. Here’s what it means:
Capture: Get into the habit of collecting the receipt of every transaction. This is the hardest part. Once you master this, the others will follow.
Check: Set time apart to write down the information behind the receipt. The longest time to set this is alternate weeks. So, you don’t forget. Write down the date, item, and purpose. For meetings, write down the people who attended. Make sure you separate personal and business expenses.
Record: This is the bookkeeping stage. Enter your info into an Excel spreadsheet or accounting software. Excel spreadsheet might be cheaper, but accounting software will save you more time!
Review: Each month, consolidate and review four reports – a balance sheet, an income statement (P&L), an accounts receivable ageing report, and an accounts payable report. Compare this with the previous month.
Act: Set a time for you to act. For example, be assertive in collecting debt from slow payers. Save money also by paying accounts payable as quickly as possible. Take steps to improve any areas of concern in your reports.
Cloud-based accounting software is perfect for you especially when you’re on the go. With protected user access, it’s safer than traditional software. Not only that, but it is also cheaper with its monthly subscription (some even free) and automatic updates without the IT man hours. Scalable, cost-effective and easy to use with real-time data – it’s great for small business owners.
With the tips above, we trust they will help your business build a strong financial foundation. You’re now all set for a bountiful year ahead!