How To Simplify Your Bookkeeping
Don’t want to hire a bookkeeper or use outsourced Client Accounting Services (CAS)? That’s okay. Here are some tips on how to simplify your bookkeeping if you are doing the bookkeeping yourself (hint: it’s easier than you think). Be proactive, get organized, and create a simple system that works for your business.
1. Keep personal and business expenses separate
Suppose you’re a sole proprietor or freelancer. In that case, it can be tempting to use a personal account for small business expenses like supplies or computer equipment that you’ll deduct as home office expenses. However, it can take what feels like an age to separate out business expenses from personal items when tax season rolls around. Set up an account specifically for business expenses. A separate account will make things run a lot smoother. In addition, using this in tandem with accounting software can make tax season even easier to bear. Our overviews and reviews of accounting software is available on the website AccountingSoftwareWorld.com.
Once you upgrade to an LLC (Limited Liability Company), you’ll have to keep your personal expenses separate from your business expenses. Many sole proprietors choose to register as an LLC as this protects your personal assets if someone opens a claim against your company.
2. Automate your invoices to simplify your bookkeeping
Sending out invoices can soon eat up a large portion of time each month. Switching to an AI-based automated accounts payable system can help cut the approval time of invoices by one fifth. You can still monitor the process at every stage but drastically decrease the time spent on verification and approval. Automation also makes it much easier to track payment cycle times, reduce duplicate invoice payments, and any other metrics you might want to measure. Suppliers like AvidXchange, Bill.com, Corpay One, and Vic.AI each have unique offerings in this area. More options are listed at our website AccoutingSoftwareWorld.com in the Accounts Payable section.
3. Track and file all business expenses right away
Rather than collecting a pile of receipts to capture deductions, get into the habit of tracking and filing these as they occur. Some accounting systems will allow you to scan a picture of the expense receipt and upload it to be processed, or you can store them in the cloud for processing in a batch later. Products like Zoho Expense, Tallie, Expensify, Nexonia, Concur, and more are all options. For K2, we use Zoho Expense today after using Concur for years.
It’s good practice to keep hold of the paper receipts for auditing purposes but try to adopt a “touch it once” method. For example, take a photo, upload it, and file the receipt away as soon as you get a receipt. Dext and Hubdoc are classic tools for QuickBooks and Xero.
4. Use one payment gateway
If you’re trying to keep track of multiple payment options, it can soon become extremely confusing when trying to reconcile your accounts. Having to trawl through check payments, cash payments, credit cards, and PayPal can feel like a huge challenge.
Instead, consider switching to an all-in-one payment gateway, collecting all deposits through one channel. Then, when it comes time to reconcile your deposits, you’ll save a notable amount of time!
5. Keep your website up to date
Keeping your website up to date is just good business management. But it can also make bookkeeping much quicker and easier if you have an eCommerce store or online shop. In addition, using a headless Content Management System (CMS) can make it easier to keep track of payments from multiple platforms, including your traditional website, smartwatches, and any other platforms you use.
A headless CMS also makes it easier to update or add new products, helping you reach your customers quickly and hopefully increasing sales!
Wrapping it up
Bookkeeping doesn’t have to feel like a headache. Hopefully, these hints on how to simplify your bookkeeping, if you are doing the bookkeeping, yourself provide some action items. If you need help, consider an appropriate training class. Further, by taking some time to simplify and streamline your systems now, you’ll be thanking yourself when it’s time to pay your taxes.