Online Bookkeeping Tips & Accounting Best Practices (Article, Video Links)
Operating your business requires you to make dozens of decisions each week, and managing growth creates even more challenges.
To streamline your business operations and prepare for growth, you need get the most out your online bookkeeping software. Use these online bookkeeping tips to take charge of your accounting processes.
Make the most of mentorship, too, especially when you are at the start of your wealth creation journey. Monty Cerf can help you with resources, tips, and professional insights.
Interested in video discussion? See links at the bottom of the article.
Contents
Bookkeeping Explained
Bookkeeping is the process of using source documents to post accounting transactions, and your accounting results are used to generate the financial statements.
Assume, for example, that you receive a bill from a vendor, and you want to pay the bill. The bill is your source document, and that document is used to post an increase in expenses and a decrease to cash in your accounting records.
It’s always worth reaching out to bookkeepers in your area, as you’ll benefit from their local knowledge and experience of dealing with other businesses in the region.
If you’re in California and are looking for a Sacramento bookkeeping company, for example, consider Busy Bee Advisors. This company provides small business bookkeeping solutions and allows owners to focus on their businesses. You’ll reclaim time and energy when your hire a bookkeeper. Otherwise, look for companies nearer to you, who can provide you with similar services
When you automate your bookkeeping process, you’ll quickly see a number of benefits:
Start With the End in Mind
It may seem odd, but you should consider how your accounting records might be used years down the road.
At some point, you may want to raise capital by selling ownership (stock) to investors, or you may need to borrow money to fund operations. Looking even farther down the road, you may decide to sell your company.
Investors, lenders, or a potential buyer all want to see a well-organized set of accounting records. Bookkeeping software helps you minimize errors, work quickly, and generate an accurate set of financial statements each year.
Start using software sooner than later, so you can maintain a set of financial statements for each year of company operations.
If you manage a business and want to increase your productivity, I highly recommend QuickBooks accounting software. Read this article to decide if you need the desktop or online version of the software.
Use online accounting software to dramatically increase your company productivity, and you can find more information here: QuickBooks Online Edition – Free Trial
Get Rid of Paper
Bookkeeping software allows you to back up on the cloud, and to minimize the use of paper files.
Consider, for example, the hundreds of bills you receive each year. Rather than keep paper files, you can scan and save each bill, and the bill can be electronically filed with the accounting entries posted to pay the bill.
Assume, for example, that you want to review a $200 payment to Standard Office Supply posted on November 15th. Your bookkeeping software can display the image of the bill, along with the expense account and the check number used for the transaction. This level of documentation makes it much easier to review accounting transactions.
If you want to increase cash collections, use Chaser, Credit Control Automation for Xero, QBO and Sage. Chaser’s software allows you to send personalized reminders to customers with outstanding invoices. Use Chaser to develop good customer payment habits.
Where’s Your Chart Of Accounts?
Your chart of accounts is a listing of each account name and number you use to operate your business, and you should add and delete accounts as needed. Bookkeeping software makes it simple to make changes to your chart of accounts.
Say, for example, that you’re expanding a restaurant that you operate. You’re adding more space in the kitchen, and purchasing more ovens, refrigerators, and other equipment. Each of these new assets should be posted in your accounting system as a fixed asset, so that you can post depreciation expense.
With bookkeeping software, you can quickly create a new account name and number, and the new account will be an option that you can choose when you post accounting activity. If you need to post $500 in depreciation expense for the new Sub-Zero refrigerator, your accounting system can access the account name and number automatically.
Maintaining a useful chart of accounts make your accounting records and financial statements more accurate.
Keep Vendors Happy
Paying your vendors on time is important, so that you can order quality products and services from a reliable supplier. When you receive a bill, you can set up payment reminders in your bookkeeping software, so that you can pay on time, and possibly take advantage of discounts.
Assume that your restaurant orders meat from Hillside Meat and Fish. Hillside offers a 5% discount on invoices paid within 10 days, and you make a note in your software system. If you have sufficient cash available, you can respond to a software alert and pay the invoice to take advantage of the discount.
Bookkeeping software helps you manage your bills and available cash flow.
QuickBooks Online Edition – Free Trial
Avoid Payroll Problems
Processing payroll may be the most time-consuming task for a business, and using software can make a huge difference. Payroll requires these four steps:
- Data collection: Workers fill out a W-4 form, so that the employer can calculate the correct amount of tax withholdings from gross wages.
- Pay calculation: The company computes tax withholdings, and subtracts withholdings from gross pay to determine net pay.
- Payments: Workers are paid by check, or by direct deposit.
- Reporting: The firm reports tax withholdings to the federal and state taxing authorities, and forwards the payments withheld.
As an employer, you may also have to calculate withholdings for company benefits, such as insurance coverage.
Bookkeeping software allows you to collect data and store it online. The software calculates net pay, and you can link your accounting system to your company bank account. Workers can be paid electronically, and your software can generate the withholding forms.
Do You Know Total Costs?
You can’t price your products and services correctly, unless you know the total costs you incur.
If, for example, you want to generate a $10 profit per baseball glove manufactured and sold, you need to know the total costs incurred to manufacture, package, and ship each glove. If total costs are $60, you need to price each glove at $70.
Bookkeeping software helps you track and document each cost you incur in your business, and you’re less likely to miss an expense. Using software allows you to price your product correctly to generate a targeted level of profit.
The Payoff
Purchasing and installing bookkeeping software requires time and effort, but the payoff more than justifies the cost. Use software to operate more efficiently, and grow your business profitably.
Video Links:
Ken Boyd
Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies
(email) ken@stltest.net
(you tube channel) kenboydstl
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