Basic Bookkeeping Tips
Posted on Thursday, June 2nd, 2011
If you run a business, bookkeeping helps you assess the financial health of your organization and make important financial decisions. There are two common types of bookkeeping methods. An important tip is to ensure which one works best for you or your company. The first method is cash-based. It records your income when you receive your money and your expenses when you pay for something. This is simple enough if you are keeping records of your personal finances. The second method is accrual-based. It records income and expenses when they happen, not when payment is exchanged. This works best for keeping financial transactions of your company as most companies tend to deal with transactions on credit. Another major tip is ensuring you maintain accurate records of all financial transactions at the end of each day. Although this requires you to spend some time and effort everyday, it is worthwhile as it prevents backlogs and enables you to detect any irregularities immediately. It will be more confusing to have to deal with several days worth of finances which can lead to errors and mistakes in calculation. Maintaining daily records will also ensure your financial status remains updated.
Checks should always be reviewed carefully. They are as good as cash and will throw your finances off-balance if they are mistakenly recorded. Take note of cancelled checks or you will find yourself unable to balance your books. It is always advisable to leave an audit trail. Keep all your receipts, invoices, statements and anything which details your financial transactions. You may need them to trace back your financial activities if you detect any error in your books. File them in numerical order so that you can find a specific invoice or check quicker. Using a computer bookkeeping software will help you tremendously in organizing your books and providing accurate calculations. It will be much easier and convenient to track all your income and expenses. In order to avoid confusion, ensure you remain consistent in your style of bookkeeping. If you are using the double entry bookkeeping system, then stick to it. Always use the same words to avoid making repeat entries. Ensure you separate your personal finances from your business ones. Don’t file your personal purchase of a water bed under company expenses. Know your deadlines for submission of any forms to avoid any penalties.