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8 Ways to Keep your Books Balanced
As a business, keeping your books balanced keeps you organized, prevents financial gaps and allows you to accurately plan out your future expenses. It may seem daunting or tedious, but the attention to detail will greatly impact your business. Here are 8 ways to stay on top of the accounting:
- Know your receivables. When you send out an invoice, you’re waiting for your customer to pay you back. When the money comes, the amount applies to their invoice and is considered paid. Sounds straightforward, right? Yet, tracking deposits and updating invoices often get put aside. Make sure you are regularly updating your spreadsheet to stay on top
of what is owed, paid and deposited. - Copy your expense receipts. Saving copies of your expense receipts will protect you during tax season, and it also helps you track cash flow! If the idea seems daunting, try downloading receipt scanning apps like Expensify to help you keep track of travel, home office, entertainment, meals and gift expense receipts. Don’t forget to record cash payments as well!
- Invoices vs. receipts. Speaking of invoices and receipts — let’s make a clear distinction of what exactly is what. Far too often, small business owners can get these mixed up, which becomes an accounting nightmare. An invoice is a detailed bill that is sent to a customer
after they’ve received your services. A receipt is proof that the transaction happened. Keeping these two separated will save you. - Know where cash goes. It’s easy to spend money without even thinking twice about where it’s going. In your weekly or monthly financial reviews, record the cash flow in and out of your business. The monitored income direction helps you understand how your money cycles.
- Keep it personal. Your personal accounts should rarely blend with the business account. It’s okay if you want to use some of your own money for the business, but make sure you minimize the movement to prevent bookkeeping errors. We recommend getting separate credit cards and using the business card for all business purchases.
- Do double-entries. A double-entry means that when you update your books, you account for both the gain and the loss. For example, if you purchased $30 of new inventory, you would account for the $30 spent and record the $30 gained in inventory. This method demonstrates where your money is going.
- Keep accounts charted. Every business has multiple accounts, which means you need to track these accounts separately. Make sure you are logging your transactions and balancing for receivables, payables, sales, purchases, payroll expenses, owners’ equity and retained earnings accounts.
- Utilize technology. Programs can be extremely beneficial when it comes to bookkeeping, tracking financial flow and preparing financial statements. If you do decide to use software, such as QuickBooks, make sure you are keeping a digital or physical copy of your receipts to avoid inconsistencies.