As a small business owner, keeping your books in order is paramount to ensuring the success of your business. Unfortunately, many business owners find themselves in a situation where their books are a mess.
Just like your home needs a spring clean every now and then, your business’ books need to be cleaned up on a regular basis too. Here’s a checklist of things you need to do to get your business’s books in order.
Why Bad Bookkeeping is Harmful to Your Business
Failing to keep accurate records can have a number of consequences for your business. For starters, it makes it difficult to track your income and expenses, which can lead to cash flow problems. Additionally, it can result in you over-paying or under-paying your taxes, and you may even find yourself in hot water with the authorities.
Bad bookkeeping can also damage your business relationships. If you’re constantly late in sending invoices to your clients or suppliers, they’re going to get fed up and may look elsewhere for a better partner.
With that in mind, let’s take a look at how you can clean up your business’s books.
1. Root Out Data Entry Mistakes
One of the first things you need to do when cleaning up your business’s books is to root out any data entry mistakes. These can be easy to overlook, but can cause big problems down the line.
To find data entry mistakes, start by going through your transactions one by one. Make sure that all the information is correct, and that there are no duplicates. You should also check that all of your transactions have been properly categorised. You can usually do this by reviewing posting or transaction reports showing every transaction in each category.
2. Look for Duplicates
Duplicate entries in your books can cause all sorts of problems. Not only do they make your books look messy, but they can also lead to you making incorrect calculations or paying a supplier twice. The best way to identify and correct duplicates is to reconcile your accounts - see the next step.
3. Reconcile Accounts
The next step is to reconcile all of your accounts. This means making sure that the balances in your books match up with the balances on supplier, bank and credit card statements.
If there are any discrepancies, you need to figure out where the problem lies and make the necessary corrections. This can be a time-consuming process, but it’s essential in making sure that your books are accurate. Doing this regularly will make any errors easier to find.
4. Update Your Accounting Software
If you’re using outdated accounting software or, even worse, spreadsheets, then now is the time to invest in a newer version. Newer accounting software is easier to use and can automate many of the tedious tasks associated with bookkeeping. If you’re already using cloud software, great! Any updates will be automatically installed for you.
5. Hire a Professional
When cleaning your home, you can spend hours and hours doing it yourself. In the end, your house may be better than when you started, but you’re probably exhausted and it won't be industrially clean.
The same is true when cleaning up your business’s books - it can be a time-consuming and tedious process, and your records still may not be exactly right at the end of it all.
The best way to clean up your books is to outsource to a professional. This way, you can be sure that your books are in good hands and that they’ll be accurate and compliant with all the latest regulations.
Final Thoughts
Cleaning up your books is not an easy task but it is necessary for the financial health of your business. Without up-to-date and accurate records, it will be difficult to track your income and expenses, understand your tax liability, or maintain good relationships with your clients and suppliers.
Many business owners think of a clean up as a cost, when really it's an investment in the financial health of any business.
