Keeping track of all your financial transactions is crucial to keep all your money expenditures on track. Bookkeeping helps you in the smooth tracking of your business finances by recording, organizing, and classifying every business transaction.
Here's how you can do efficient bookkeeping without confusing yourself:
Keep Your Business As Personal Expenses Separate
The first step to keeping a smooth record of transactions is to keep a separate business account and never use it for your personal expenses.
If you keep your personal and businesses in the same account, you can experience unnecessary stress while bookkeeping or filing for taxes.
Choose A Suitable Bookkeeping System.
There are two most used methods of bookkeeping; single-entry bookkeeping and double-entry bookkeeping.
In single-entry bookkeeping, you record your entries only once as either income or expense. This type is suitable for a new business startup that keeps things simple. On the contrary, double-entry bookkeeping is more complex and robust and is ideal for more established businesses.
Choose A Suitable Accounting Method.
One crucial decision that you have to take before starting your bookkeeping is to either make your accounting process accrual or cash-based.
In cash accounting, transactions are recorded only when the money hits or is taken away from your account. In accrual accounting, you make and enter as accounts receivable or accounts payable as soon as you bill your customer or spend it. Even if you don't receive or pay for quite some time, you still make an entry of it.
Using Efficient Tools
The tools you use help you greatly in smooth bookkeeping. There are dozens of tools available like Quickbook, Wave, or Xero. Other than that, you can also use an excel spreadsheet for your bookkeeping purpose.
Choose A System For Document Storage.
Storing your documents becomes essentially important at the time of tax payment when you have to show the validity of your expenses. Therefore, keeping supporting documents like receipts and records is important.
It's always a good idea to use a cloud-based storage system like Google Drive, Dropbox, or Evernote for storing and sorting your financial documents.