Bookkeeping and accounting may not be daunting but are an essential part of business and financial management. A balance sheet is one of the financial statements that help entrepreneurs evaluate their business’s financial health. However, many business owners, especially those with a traditional accounting system in place, face difficulties in balancing their books. Balanced books are vital to gain a clear picture of your business and financial status. It also acts as a strong foundation for vital strategic decisions. While it can be tiresome, there are ways to ensure your books are always balanced. Here are some tips to help you balance your books.
Keep Your Business and Personal Accounts Separate
Mixing business and personal accounts is a common mistake that hinders balancing books. The mixture makes accounting difficult as you have to weed out business related invoices, bills, receipts and payments before recording and balancing. This leads to errors disallowing statements to tally. Having separate accounts is a sign of better organization, making it easier for accounting and balancing your books.
Make Sure You Record Every Single Transaction
Most small business owners are forced to manage everything on their own. With so many things on their plate, accounting mistakes are bound to occur. Missing out on recording daily entries and reconciliation can make balancing books difficult. While big transactions are efficiently managed, petty transactions are often forgotten. Hence, it is vital to record every single big and small transaction to make sure your statements tally.
Invest in an Accounting Software
Accounting software and cloud programs are designed to assist you in better financial management. There is a chance that you may lose or misplace paper receipts or invoices, making it difficult to recognize and find errors in the books. This can hinder balancing your books. Software allows you to store and backup data electronically, reducing the risk of missing out on entries. Moreover, many banks allow you to download data directly into the program, saving time and effort. Hence, it makes it easier to record and manage entries assisting in balancing your books.
Schedule an Accounting Period
When you don’t have an organized schedule for recording and reviewing financial statements, it can lead to errors, overlooked payments and overspending. It is best to input your income and expenditures weekly if not daily and have a monthly schedule to review your financial statements. While you can review them quarterly, reviewing them monthly helps understand and manage accounts easily. It also makes it easier to troubleshoot errors in case your statement does not tally. Rectifying bookkeeping errors is easier when reviewing is done monthly, rather than quarterly. Once this becomes a regular part of your schedule you start spotting trends that help you make better business decisions.
Implementing these tips will ensure an organized bookkeeping system and balanced books. If you still feel that bookkeeping does not fit in your schedule, you can outsource it to professional bookkeepers. Their knowledge and expertise in the field ensure you have an efficient bookkeeping system in place.