Does your company have a system for managing records?
Taxes aren’t the only reason small business owners need to stay on top of their records. Keeping records organized year-round helps to save time, reduce stress, maximize deductions, and prevent accounting mistakes. Without this upkeep, owners don’t have an accurate picture of their financial health, which can lead to cash-flow issues and poor business decisions.
To prevent disorganized accounts from impacting your business, keep reading below where we’ve outlined the best practices to keep you organized.
1. Digitize
Paper records are not only outdated, but they often lead to errors from lost files or mistakes. That’s why every business owner needs to digitize files whenever possible.
To do this, be sure to take pictures of receipts, invoices, and expenses as soon as they come in. Once a photo or scan is taken, file them onto a computer or an accounting app.
2. Separate Personal From Business
A common mistake amongst business owners is that they mix their personal expenses with business ones. This makes bookkeeping extremely difficult as every transaction will need to be traced and manually categorized for taxes.
Avoid this issue by having a dedicated business bank account and credit card, which makes bookkeeping easier throughout the year and when taxes are due.
3. Create A System
Business owners need to have a consistent way of filing records. Without consistency, records are easily mislabeled and lost, especially if multiple employees are involved.
Develop a system that works for you by saving and organizing documents based on the category it belongs to (for example, by receipts, bank statements, invoices, etc.). These categories should then be broken down further by the month it occurred in. Doing this makes it easy to locate records as all the filing will be consistent.
4. Use Cloud Based Software
There are plenty of apps and software programs specifically designed to help small-business owners keep organized. Platforms like QuickBooks and Xero simplify the process by automatically categorizing transactions on your behalf. Files uploaded into these systems are also saved and backed up, which makes it easier to track expenses and reconcile accounts since you know you will always be able to find a copy.
5. Monitor Regularly
Owners shouldn’t wait until the end of the quarter or tax season to check accounts. Instead, bank accounts, receivables, and payables should all be reviewed weekly or monthly in order to stop and prevent errors from piling up.
Simply dedicate a few hours to review, file, and save documents. Doing this helps ensure accuracy come tax time and can spot things like missed payments or unpaid invoices that would have gone unnoticed otherwise.
6. Review Compliance Regulations
Certain industries are regulated by compliance guidelines. Although these rules change regularly, it is still the responsibility of the owner to know them and comply. If an owner fails to realize the updated laws, they will get in serious trouble if caught.
Given the severity of compliance matters, owners should make a point to review the regulations for their industry in order to adapt their procedures to meet them.
An easy way to ensure your company is always meeting regulations is to work with a financial professional who will review the regulations for you and advise you of any changes.
If you’re a business owner that would like help setting up or improving your record-keeping process, call us at 407-328-5001, and the team at A.P. Accounting & Tax Services will keep you organized year-round.
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