Small businesses constitute major contributors to the growth of all nations developed or otherwise. The importance managing well and of proper bookkeeping for small businesses cannot be underestimated as small business owners nowadays need to keep track of all activities going on in the business most especially their financial activities.
This has become so important that they need to be aware of issues bothering on their revenue; expenses, receivables and payables so as to enable them assess the financial performance of their business.
But unfortunately, most small businesses do not keep financial records because they do not know how to go about it or do not have the financial capacity to shoulder the cost of establishing and maintaining a financial recording system.
This has caused some of these businesses a great deal of financial loss as they are susceptible to the fraudulent activities of staff members and customers who deal with them on a regular basis.
This can also be a source of tax nightmare to small businesses.
The following are basic bookkeeping tips that can be used by small businesses:
- Business Account: Business and personal accounts should be maintained separately: In order to make handling of accounts easy, save time and maintain accurate records, business accounts should be separated from personal account.
- Plan your expenses: Major expenses should be adequately planned for by preparing a budget so as to avoid spending money on things you don’t need.
- Maintain a cash book: All cash transactions should be recorded in the cash book so as to ensure proper monitoring.
- Monthly Bank Reconciliation Statement: The cash book and bank account should be reconciled at least once every month so that discrepancies can be easily identified and corrected.
- Debtors Record: This record should be updated from time to time and measures should be taken to ensure that money is not unnecessarily tied to the hands of debtors for a long period of time. A debt collection policy should be put in place to make sure that debts are collected as and when due.
- Creditors Record: Creditors record should be maintained so as to know the exact amount the business owes and to whom the amount is being owed. A payment policy should be put in place in order to offset the debts in due time to avoid litigation which could lead to bankruptcy.
- Archive Source Documents: Bills should be properly kept and payments should be made on time. Receipts should be kept for every payment made for further references.
- Tax Matters: Tax matters are fast becoming a source of concern for small businesses. Money should be set aside each month to enable the business settle its tax liabilities at the end of the year. Also, efforts should be made by small business owners to register with the relevant tax authorities for the payment of other forms of taxes and levies that are peculiar to that line of business.
- Business/Financial Advisor: These are professionals who can give you advice on how to manage, raise finances and deal with any challenge that may arise in the business.
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