Running a business means you’re wearing many hats at once. Whether you're managing inventory, overseeing employees, generating invoices, or handling bookkeeping, tasks can quickly pile up and become overwhelming.
If you delay your bookkeeping (or do it inaccurately), it can get messy. From inaccurate tax filings to uninformed business decisions, bookkeeping is one of the cornerstones of running a successful business. So in this blog, let’s learn how to catch up on your bookkeeping, starting today!
Why is bookkeeping important for small businesses?
Bookkeeping is just as important for small businesses as it is for corporations. Bookkeeping allows you to keep track of your business finances and allows you to file taxes accurately. You can also prepare financial documents only once your bookkeeping has been updated.
Beyond compliance, bookkeeping helps you gain a clear picture of your business health. Are you spending too much on inventory? Are your cash reserves shrinking? With good bookkeeping, you can identify problems early and make informed financial decisions in the short and long run!
6 ways to catch up on your bookkeeping
Ready to tackle your bookkeeping and get your ducks in order? Here are the 6 steps to take today:
1. Gather all your receipts
The foundation of bookkeeping is in the receipts. If you haven’t put away all your receipts in a neat folder and a chronological order, it’s time to start it today. Start hunting the following records for your business:
- Bank statements,
- Business expenses,
- Customer invoices,
- Credit card statements,
- Receipts for non-deductibles,
- ATM slips,
- Bank reconciliation statements,
- Vendor accounts,
- Bad debt expenses,
- Business revenue
Once you’ve gathered all of these, arrange them in a chronological order and move to step two.
2. Reconcile your bank accounts
Once you’ve gathered your receipts, reconciling your bank accounts is critical. This ensures that your bank statements align with your recorded transactions.
Download recent bank and credit card statements and cross-check them with your records, spotting discrepancies such as forgotten expenses, double charges, or incorrect entries. Reconciliation not only helps you maintain accurate records but also identifies potential errors or missed deductions that could save you money!
3. Separate personal from professional
Mixing personal and business expenses is one of the most common mistakes small business owners make, often leading to confusion and compliance issues. If you don’t already have a dedicated business account, open one immediately.
Going through your past transactions to tag personal expenses can also help you clean up your books. Moving forward, consider using bookkeeping software or apps to automate this separation, which will save you time and hassle.
4. Digitize your financial records
Want a trick that makes bookkeeping a breeze? Go paperless! Digitizing your financial records such as expense receipts helps you update your books anytime you want to. Receiptor AI helps you scan and organize receipts on the go, straight from your camera roll, emails, and WhatsApp. No more stress when it comes to finding that one receipt!
5. Gather your tax documents
Tax documents are integral to accurate bookkeeping. After all, you can’t catch up with your bookkeeping unless you can properly file for taxes from them. Common tax documents you’d want to gather now include:
- Income records: Sales reports, invoices, and statements of earnings.
- Expense records: Utility bills, rent, software subscriptions, travel costs, etc.
- Payroll information: W-2s, 1099s, and any benefits disbursed to employees or contractors.
- Tax forms from the previous year: This can help you spot missed deductions or identify errors.
Tip: When putting down your expense records, keep an eye out for tax write-offs or deductions to save you tax money!
6. Go through everything with a tax professional
Finally, once you’ve caught up on the basics, it’s a good idea to review everything with a tax professional. Tax professionals have a better attention to detail than an average bookkeeper and they can spot missed deductions, ensure compliance, and provide valuable advice on reducing your tax liability.
It might seem costly to hire a CPA or tax professional in the short run, but they’ll often save you more money in tax liability deductions and more. So when tax season comes around, save both tax money and stress by letting a seasoned tax professional handle your taxes.
Final Thoughts
Catching up on bookkeeping can feel like a tardy chore when you’ve got a mess at your hands. But it’s also the financial backbone of your business. So how do you catch up on bookkeeping?
Separate your personal and business activities, reconcile your statements, collect your tax forms, and use Receiptor AI to scan, save, and categorize each receipt! Make your life easy today and sign up for a free trial with our AI-powered bookkeeping software.
