7 Accounting Tips for bookkeepers to keep the books balanced

7 Accounting Tips for bookkeepers to keep the books balanced

Accounting plays a vital role in businesses of every size. Maintaining balanced books can help financially forecast months into the future and alert you to potential financial gaps.

In this post, we are rounding up the best accounting tips to avoid common mistakes that could have a detrimental impact on the business.

1. Pay close attention to trade receivables

When an invoice is issued, you record a receivable, meaning you log that a customer owes you money. By checking this listing you are able to easily see if a customer has an outstanding balance.

When the customer pays you, the amount should be applied against their invoice, and it should be marked as paid. Customer deposits all too often are left to reconcile at a later date since there are never enough hours in the day. When audit & tax time comes around, you are left with a lot of customer deposits in your revenue account and a report of your receivables that don’t match. That is why you need to make it a point to keep track of your transactions as they happen. Apply your customer’s payments monthly — it can save your tons of time on invoicing (and money) in the long run.

2. Keep a track on cash flow

As you perform weekly and monthly financial reviews, consider producing a cash flow statement. These statements give you a broader understanding of cash movement within (and outside) of your company. A cash flow statement essentially monitors income direction.

Cash flow statements can give you the knowledge you need to anticipate expenses and more appropriately allocate income. They are also useful when building financial trajectories.

3. Records expense receipts

Unfortunately, it is a common mistake for small business owners not to save copies of their expense reports. This can result in a wide range of tax, accounting, and cash flow issues.

If you have ever looked at bank statement and seen a charge for a thousand rupees and had no idea what it was, then you are familiar with the problems that come with poor record keeping.

This problem can be solved by saving a receipt of every purchase that your business makes. It may seem like a lot of work but there are a few accounting tips to make it easier.

4. Keep Personal vs. Business Accounts Distinct

A lot of small business owners use some of their personal funds to keep things running for the first few months. There’s nothing wrong with dipping into personal funds, but using personal bank account for business can be troublesome.

Having a separate bank account for business needs makes it easy for accountant or bookkeeper to see how money is being spent. If personal account is used for business purposes, important business transactions could be overlooked.

5. Understand the difference between capital & revenue expenditure

Capital assets are for fixed assets, which are expected to be productive assets for a long period of time. Revenue expenditures are for costs that are related to specific revenue transactions or operating periods, such as the cost of goods sold or repairs & maintenance expense. Capital expenditures are charged to expenses gradually via depreciation, and over a long period of time. Revenue expenditures are charged to expense in the current period. Wrong accounting treatment of these expenditures will lead to incorrect results.

6. Prepare a budget

When you compile a monthly financial report, use it to help anticipate the business’s financial trajectory. This could simply involve identifying upcoming costs, such as tax payments or legal fees. It may incorporate more nuanced plans for company expansion, including budgeting for new hires and higher rent.

7. Leverage technology

In practice, trying to keep accurate accounts is a complex process. As the business grows, this process becomes even more stressful.

That is where the help of technology comes in. Accounting systems are much easier to use that recording every transaction the business makes into physical ledgers the way things used to be done.

If you decide to use software for your accounting needs, make sure you still keep a copy of all of your receipts, either physically or digitally.