Ten essential bookkeeping tips every tutor needs
Photo by Alexander Grey on Unsplash
Managing a business can be tedious without the additional burden of maintaining accounting records. Little wonder many business owners and freelancers relegate the need for accurate financial computing behind other activities that seem more important. However, reports have shown that 82% of businesses eventually fail because of a lack of proper accounting practices. In other words, bookkeeping is vital for long-term business success.
Bookkeeping tips and tricks help simplify the bookkeeping process so that workers and business owners can maintain accurate financial records by the minute. Workee incorporates some of these tips to help freelancers better control their finances.
Check out our practical tips for efficient and stress-free bookkeeping.
Bookkeeping is the practice of recording the financial transactions of a business. It forms the basis of advanced accounting practices. It involves recording sales, income, expenses, and all business financial affairs.
Bookkeeping is as old as books, but the modern-day double-entry bookkeeping system was developed by Luca Pacioli, an Italian mathematician in the 15th century. This system has been widely used in every industry to keep track of financial information.
The types of bookkeeping
There are various bookkeeping styles, and the most suitable one for you will depend on the nature of the business you manage. For instance, bookkeeping tips for self-employed workers may vary from tutor bookkeeping tips. Thus, the first step in bookkeeping includes a proper appraisal of the nature and size of your business, so you can decide which method suits you best.
There are traditional and contemporary methods of bookkeeping. The traditional bookkeeping methods are:
This is the simplest bookkeeping method, where a simple entry is made per transaction. Entries in the cashbook are recorded according to income and expenditure. With little or no formal training, anyone can maintain this bookkeeping style. This makes it an easier option for tutors, teachers, freelancers, and small business owners.
This is a more complex bookkeeping method where every transaction is recorded in two separate accounts for cash and sales. Every sale is a debit to the cash account and a credit to the sales account. This leaves less room for error in computing because both the debit and credit sides have to be balanced by the end of the day. Larger corporations prefer the double-entry bookkeeping method because it reduces incidences of error in computing.
Contemporary bookkeeping is the modern style of bookkeeping. It involves the use of software tools rather than books and paperwork. It is faster and more efficient.
Bookkeeping tips are crucial
Bookkeeping is an essential part of business growth. It offers an objective way to measure the financial health of your business. Bookkeeping is the source of information for strategic decision-making on investments and expenditures.
Business bookkeeping tips help make the accounting process simpler, more timely, and more efficient. Here are some of the ways:
Accurate financial analysis: Bookkeeping for small businesses help you know exactly how much profit your business is making. This way, you can know what needs to be improved or removed. Bookkeeping also helps you detect financial leakages — and that is the first step to fixing them.
Meeting business goals: By implementing useful tips for bookkeeping, you can track your progress in meeting business targets. Bookkeeping provides an objective metric for measuring the financial progress of your business so you can meet your goals.
Tax compliance: Tips for bookkeeping help you to readily calculate and make accurate tax payments. With these tips, your business can comply with government directives like dues, tariffs, levies, and other corporate fees.
Bookkeeping tips and tricks
The best practices are not always the most difficult. Many times, simple tweaks here and there can transform the entire game. Here are a few business bookkeeping tips for small businesses:
1. Know the importance of bookkeeping
How you perceive bookkeeping determines whether or not you will take it seriously. Many business owners might find bookkeeping a boring routine, but it is all too important for business success in the long term. Successful freelancers and small business owners prioritize bookkeeping because the financial health of a business affects its other aspects.
2. Learn the basics
Your business might not afford you the time to learn about professional bookkeeping, or you might simply be uninterested. However, it helps to know the basics of how to record income and expenses, read balance sheets, calculate gross and net gains, balance accounts, deduce taxes and fees, record debts, and make reports. These simple bookkeeping practices can change everything for your business.
3. Separate personal expenses from business expenses
Many small business owners do not draw the line between personal finance and that of the business. Mixing both up complicates the process of calculating profit and loss. Also, accurate tax deductions might be difficult because personal money is taxed differently than business money.
4. Keep track of cash payments
Sometimes, the pressure of expenses may tempt business owners to spend cash as soon as it comes. This, however, can hurt your bookkeeping process. Ideally, every income should be properly recorded and deposited into the account before it is withdrawn for business purposes. Keeping track of cash payments also requires noting details such as the payee's name, purpose, and payment statement.
5. Keep an audit trail
It helps to have a safe place for receipts, invoices, and all financial paperwork. Where possible, all transactions should be recorded immediately after they occur. Otherwise, the physical evidence relating to such transactions must be securely kept for a more convenient time. Freelancers may not always be able to balance their accounts daily, but keeping an audit trail means that you can always refer to your financial documents in case of any inaccuracy. In fact, the IRS in the United States demands that businesses keep receipts for transactions above $75 for six years.
6. Create regular reports
This is one of the most important bookkeeping tips for small businesses. It is inadvisable to leave your accounts open for too long. The longer they are open, the harder it will be to close them. The standard practice is to close accounts at the end of each business day and then create monthly reports. A report is a compilation of financial information pertaining to a business.
7. Manage credit sales
Selling on credit is hardly a good idea, but in cases where it can not be avoided, there should be proper documentation and strict payment deadlines. Credit sales can badly affect your business because they are not real-time income yet are subject to tax deductions. Also, they can quickly turn into bad debts if not properly managed.
8. Automate the bookkeeping process
There are cloud-based software applications that provide digital accounting services. You can generate automated invoices, scan receipts, and pay taxes online. This solves the problem of time wastage and the likelihood of error that comes with manual computing. Some bookkeeping software also includes automated services such as tax payment reminders and bank reconciliation statements. About 64.4% of small businesses use software for accounting because manual bookkeeping wastes time and is prone to error.
9. Outsource to experts
You can hire a professional bookkeeper to do all the paperwork. This helps you save valuable time and effort, especially if there is an unfavorable time-to-money ratio. Professional bookkeepers can work with you either remotely or in person. It is important that they balance your accounts correctly and deliver your statements on time.
10. Set reminders for payment deadlines
Deadlines can sneak up and meet you unprepared. Set reminders to keep you aware of payments of taxes, bills, dues, and repayment of loans. This keeps you in charge of your schedule and avoids unnecessary expenses that may result from not meeting up with payment deadlines.
Make bookkeeping easy with Workee
Among other offerings, Workee is also an excellent, efficient, and free bookkeeping tool.
Workee's features offer an all-in-one integrated workspace solution for freelancers, private tutors, and business owners in the following ways:
Free Website: What better way to identify yourself and your business than an attractive, professional website? However, that can cost a lot of time and money. Except, of course, you use Workee. With the website builder from Workee, you can get yourself online in a matter of minutes. Workee is a great way to manage your business.
Automated Payments and Invoicing: Remember how we talked about automated bookkeeping? Workee helps with that. With Workee, you can send invoices and receive payments automatically without market fees. This feature also keeps all of your transactions in one place because you might need those audit trails at any time.
Scheduling: With Workee, you can schedule appointments with your clients. Not only that, but you also can schedule your tax payments and get regular reminders from time to time, so nothing takes you unawares.
Video Calls and Conferencing: Workee offers video call features for you to connect with your customers. You can also collaborate with your team in real time via our video conferencing feature.
Did you know that Workee offers all of these features for free? There's more. Visit our homepage for a comprehensive list of our unique solutions according to your occupation, and sign up for our services.
Excited to start with Workee? Schedule a demo with our Manager!Schedule
Keep updated about latest industry insights and subscribe to our newsletter