TOP 3 BOOKKEEPING TIPS
On forums and Facebook I come across many topics surrounding business bookkeeping. If you ever had questions about your bookkeeping, then I have the Top 3 bookkeeping tips for you.
Tip 1: Don’t do it yourself
Bookkeeping is a skill, which means you can be better or worse at it. If you aren’t an accountant or bookkeeper yourself, then the latter is most likely. If you are looking to do only the bookkeeping for your own business, is it really worth to take the time, effort and money to learn how to do it yourself?
And besides, there are so many edge cases relating to your specific business and country’s regulations that you often end up wasting time on forums or Facebook asking for advice on how to book this expense or how to file that report.
It is not worth it! Hire someone to do it for you. Even if you have a small business, as that means that a bookkeeper will also charge you less as they also have less work.
Save that valuable time and use it to grow your business.
Tip 2: Look at the Profit & Loss statements
Having someone else do the bookkeeping for you doesn’t mean you don’t concern yourself with any of it. You still need to look at the result, which is the P&L, to see whether your business is profitable or not, where the expenses are and so on.
Recently I was talking to a business owner because I wanted to invest in his business. And he didn’t even know what some of the expenses on the P&L were! And those expenses were 5-10% of his total expenses mind you. This shows me that he wasn’t on top of things financially, and later he admitted as much when he told me he had been paying is personnel way too much for way too long.
Long story short, look at the P&L on a regular basis. Once every 3 months if your business is stable, once a month if your turnover fluctuates a lot.
Tip 3: Monitor and Plan Your Cashflow
Did you know that even profitable business’s go bankrupt? The thing is you don’t go bankrupt when you run a loss, ask Tesla CEO Elon Musk. You go bankrupt when you run out of cash.
And, funny thing, but the P&L doesn’t state the cashflow. The simplest example is invoices you send with a 30 day payment term. If you send them on 15th of October, then in your P&L it shows as turnover in October. However, your client will (hopefully) pay on 15th of November. So the flow of cash is quite different from what you see on the P&L.
Monitor your cash position regularly. And plan for the big cash drains that you expect, for example the yearly tax payment, quarterly VAT payments, salaries of personnel and other big ones.
These are The Top 3 Bookkeeping Tips. They might not have been what you expected, but this is how to go about it if you want to grow your business and make sure you stay sane while doing it. Do you have any bookkeeping tips with that in mind? I love to hear them, please leave them in the comments below.
See you around.
All the best,