9 Bookkeeping Tips & Tricks for Small Service-Based Business Owner
Updated: Dec 19, 2022
As a small business owner in the service industry, you know that keeping your finances in order is essential to your success. But doing your bookkeeping can be daunting, especially if you're not familiar with all the terminology and concepts. That's why we've put together this list of top bookkeeping tips for small service-based businesses. Keep reading for helpful advice on how to streamline your financial operations and keep your business running smoothly!
Before we jump into the main topic it's always a good idea to make sure we're on the same page.
In short, it's the process of recording, storing, and retrieving financial transactions for your business. This includes things like invoices, debts, receipts, payments, and more. Essentially, bookkeeping is used to track the money coming in and going out of your business - which is critical information for making sound financial decisions.
Without accurate bookkeeping, it would be impossible to know how much money your business is making (or losing). And that's why it's such an important task - even if it can be a bit tedious at times.
Now that we've got that out of the way, let's move on to the top bookkeeping tips for small businesses!
Top 9 Bookkeeping Tips for Small Service Business Owners
If you are a doctor, chiropractor, salon or spa owner, lawyer, tradesperson, auto repair shop owner or own any small business, these tips will help you get a better understanding of your bookkeeping and how to streamline the process.
Tip #01: Keep Business and Personal Finances Separate
This is essential for every business. Personal finances need to be kept separate from your business expenses, I highly recommend you have separate bank and credit card accounts that are used exclusively for business. Unfortunately, it’s one of the most violated rules.
With a single bank account, it’s much harder to separate your personal and small business banking needs. Why? Because you’d have to know the purpose of every single purchase you make. Sorting through your personal transactions is time-consuming, expensive, and can lead to mistakes.
Having separate personal and business accounts provides a clear distinction between your family and business finances. This helps you keep track of your business expenses, and makes your life easier come tax season.
Tip #02: Keep Accurate Records from the Start
This may seem like an obvious one, but it's important to stress nonetheless. To have a clear financial picture of your business, you need to make sure that your bookkeeping is accurate and up-to-date from day one.
This means recording all transactions - no matter how small - and consistently keeping track of them. If you're not sure where to start, you can hire a bookkeeper to help you get set up with the right system for tracking your transactions.
Tip #03: Get Organized
Another key to successful bookkeeping is staying organized. This means having a system in place for storing your financial documents and keeping track of deadlines. For instance, you might want to create a folder for each month where you can keep all your invoices, receipts, and other important paperwork. For example you can create folder for “sales expense, income receive, bank statement, balance sheet and so on.”
If you don’t like keeping lots of paper around, you can scan all hard copies and save them in an electronic formate. Or you could use the latest bookkeeping software like QuickBooks to help you keep track of deadlines and manage your finances in one place. Doing a little work each day can save you from doing a lot of work later on.
Tip #04: Understand Your Expenses
One of the most important aspects of bookkeeping is understanding your business expenses. This includes
Knowing what kinds of expenses are tax-deductible
Tracking expenses so you can stay within your budget
Categorizing expenses for easy reporting
How much debt do you owe
Expenses are one of the most important aspects of bookkeeping because they can have a major impact on your business's bottom line. By understanding what kinds of expenses are tax-deductible, you can save money on your taxes. And by tracking and categorizing your expenses, you can get a better handle on where your money is going - which can help you cut costs and improve your bottom line.
Tip #05: Manage Your Cash Flow
Cash flow is the heart and soul of any business - so it's important to keep a close eye on it. Bookkeeping can help you do this by giving you a clear picture of your incoming and outgoing cash flow. This information is critical for making sound financial decisions, such as when to pay invoices, how much inventory to purchase, and more.
Managing cash flow can be a challenge - but it's easier if you have a clear picture of your inflows and outflows. Bookkeeping can help you get this picture, so you can make the best decisions for your business. You can start by calculating how much money is coming and going each month. If you have money that's stuck in accounts receivable, take action ASAP! Remember, a healthy cash flow is key to a healthy business.
Tip #06: Stay on Top of Invoicing
If you work with clients, then you need to stay on top of your invoicing. This means sending out invoices promptly and keeping track of when they're due. Unpaid invoices mean a reduction in cash flow, which can hurt your business in a major way. You can use a bookkeeping service to automate your invoicing process and make it easier to keep track of what's due and when.
Also, some clients may take longer to pay than others. To help manage this, you can set up a system where you track which invoices are outstanding and follow up with clients who are late on payments. You might have to send them follow-up emails or make phone calls, but it's important to stay on top of your receivables.
Tip #07: Record Your Transactions Correctly
To run a successful business, you need to keep track of your transactions. This means recording all income and expenses promptly. The sooner you record a transaction, the easier it will be to track your finances and make sound decisions about your business. To make sure you're recording transactions promptly, set up a system that works for you, and then stick to it.
You might want to record transactions daily, weekly, or monthly. Or you might want to use bookkeeping software like Quickbooks that automatically records transactions for you. No matter what system you use, the important thing is to be consistent with it.
Tip#08: Review Financial Reports Regularly
Your accounting system provides you with reports that allow you to make proper decisions in your business. Reports every business owner should review at least once a month are the Income Statement, Balance Sheet, and the Cash Flow Statement. Other reports that may be useful, depending on your type of business, are the A/R Aging Report, A/P Aging Report, and the Payroll Report.
Twice each month, schedule roughly one to two hours to go over your company’s deposits, withdrawals, transfers, purchases, and other key items. Of course, you wear a lot of hats as a business owner, and you may not have time to take a deep dive into your bookkeeping on a regular basis. If that’s the case, it could be wise to outsource this essential task to an expert.
Tip #09: Hire a Professional
And last but not least, one of the best bookkeeping tips is to hire a professional. If you're not sure where to start, you can look for a bookkeeper who specializes in small businesses. They can help you set up your bookkeeping system, understand your expenses, and stay on top of your invoices. Having a professional on your side will make it easier to keep track of your finances and make smart decisions about your business.
While bookkeeping may not be the most exciting task on your to-do list, it is an important one. By following these tips, you can streamline your bookkeeping process and make it easier to manage your finances. And if you ever get stuck, don't hesitate to hire a professional - they can make all the difference.
Looking for the best bookkeeping services in Downey and near by Los Angeles. Contact DB Bookkeeping and let us help you streamline your bookkeeping process. We offer a wide range of bookkeeping and accounting services, tailored to meet the needs of your small business. Give us a call today to book your free consultation!