When it comes to running your own business, keeping your accounting in-order must be an achievable goal. That said, there are times where a little lack of discipline can cause some headaches down the track. Rather than getting yourself in a bind later, let’s have a look at some simple steps you can take to help keep your accounting organised.
1. Structure your bank accounts
Mixing up business and private transactions in your bank accounts is a recipe for disaster. Always use separate business bank accounts for your business transactions; your private bank accounts should be kept wholly for private transactions. The cost of business bank accounts these days is very low, and there is no excuse for not having a business bank account or accounts. Get in the habit of making regular transfers of drawings from your business to your private bank account.
2. Avoid cash, where possible
It’s best not to use cash for your business transactions, but if you use it in an emergency, then reimburse yourself using a suitable expense claim (which analyses the expenses between expense categories) so that again, all business transactions are recorded and the GST is safely captured.
3. Stay on top of your credit card bills
If you use a credit card for your business that is absolutely fine, but you should always pay your business credit card bills from your business bank account — that way no business transactions are omitted and all GST is captured. Similarly, if you use the wrong Eftpos card by mistake (such as the one for your private bank account), reimburse yourself using a suitable expense claim.
4. Managing Bartercard transactions
If you must use Bartercard, then it’s so much easier if you use live bank feeds to record all the transactions on the Bartercard statements because there are a lot of them (especially the fees and charges). Otherwise, it’s a total pain from the bookkeeping point of view.
5. Implement process for accounts receivable
Always ensure you have a system for recording whether your customers, clients or patients have paid your accounts receivable.
Equally, it’s important to track how old the debts are if unpaid so you can chase them up promptly. Your system should also record any special arrangements to pay over time or the excuses given for non-payment. It doesn’t have to be sophisticated – your accounting software will take care of it. If you’re not using accounting or invoicing software to issue invoices, just write on the face of the invoice whether or not they been paid, filing separately those paid from those awaiting payment. It’s surprising how many business people do not know who owes them money, which is just plain crazy considering how hard it is to earn the money in the first place!
6. And don’t forget about accounts payable…
Similarly, always have a system for your accounts payable. I’ve had two clients pay me twice this month for the same invoices, which is not only a hassle for me because I have to repay the money, but it is risky for them as not all suppliers are as honest as I am! It’s best to be totally organised with your accounts payable and pay them on the 20th of the month so that your suppliers know when they’re going to be paid and you know when you’re going to pay them. Research shows that the most successful businesses pay their bills on time!
7. Organise your paperwork and digitise where possible
Keep all your business paperwork in an orderly fashion. Nowadays you can scan on the paperwork and keep this electronically, either on your accounting software or in a simple electronic filing system using the US date system so that everything is filed in chronological order. Keep a separate e-folder for each month and year. If you’re old-fashioned you can keep the paperwork in physical form, but now so much stuff arrives electronically its pretty daft printing it out and wasting all that ink and paper.
Keeping your accounting organised will save you time and money, and also help you make your business more successful. Perhaps even more important, it should result in a whole lot less stress.