Running a small business has its challenges. From managing operations to building customer relationships, business owners wear many hats. One critical area that often gets overlooked is the accounting and bookkeeping. Without a robust bookkeeping workflow, it’s easy to lose track of where you are at as a business, leading to errors, missed opportunities, and plenty of $ down the drain.
In this blog, coming from a small business accountant, we’ll explore essential tips to streamline bookkeeping workflows for small businesses, ensuring your processes are efficient and stress-free.
1. Understand the Basics of Bookkeeping
Before diving into workflows, it’s crucial to understand what bookkeeping involves. Bookkeeping is the process of recording, organizing, and managing all financial transactions in a business. These transactions will be the transactions that are recorded in your business bank account. Bookkeeping forms the foundation of your financial records, impacting everything from tax compliance, financial reporting and cash flow management.
Key components of bookkeeping include:
- Tracking income and expenses
- Reconciling bank accounts
- Managing invoices and receipts
- Preparing financial statements
Understanding these basics will help you build bookkeeping workflows that address all the critical areas.
2. Automate Where Possible
Automation is a game-changer for small business bookkeeping. By using cloud-based accounting software like Xero, QuickBooks, or MYOB, you can automate tasks such as:
- Importing bank transactions
- Generating recurring invoices
- Tracking expenses with receipt-scanning tools
- Reconciling accounts in real time
Automation saves time, reduces manual errors, and allows you to focus on growing your business.
3. Standardize Your Processes
Creating standardized workflows ensures consistency and accuracy. Here’s how to establish a basic bookkeeping workflow (for the purposes of the illustration, we will assume that you are using Xero):
- Daily Tasks: Log all transactions into Xero, update receipts, and monitor cash flow.
- Weekly Tasks: Reconcile bank accounts, review outstanding invoices, and follow up on payments.
- Monthly Tasks: Generate financial reports, review profit and loss statements, and check for anomalies. Your small business accountant can help with this task.
- Quarterly/Yearly Tasks: Prepare for BAS lodgment, reconcile tax accounts, and review your budget. Again, your small business accountant can help with this task.
A clear schedule helps keep your bookkeeping on track.
4. Separate Personal and Business Finances
Mixing personal and business finances is a common mistake for small business owners. To maintain clean records:
- Open a dedicated business bank account.
- Use a business credit card for all business expenses.
- Avoid personal purchases with business funds. Use your personal bank account for personal purchases.
This separation simplifies your bookkeeping and more importantly, the time that it takes your small business accountant to process the data is reduced (and less fees for you).
5. Embrace Cloud-Based Collaboration
If you work with a small business accountant or bookkeeper, cloud-based tools like Xero and Karbon allow seamless collaboration. You can share real-time access to your financial data, track tasks, and ensure everyone is on the same page.
Cloud-based systems also ensure your data is secure, backed up, and accessible from anywhere.
6. Regularly Review Your Financial Data
A solid workflow includes regular reviews of your financial data. Set aside time to:
- Compare actuals against your budget.
- Monitor KPIs like gross margin and cash flow.
- Identify areas where you can cut costs or improve efficiency.
By staying proactive, you can catch small issues before they become major problems. Also, having regular catch ups with your small business accountant, who will review your financial data, can help in this regard.
7. Keep Your Records Organized
Disorganized records can slow down workflows and lead to errors. Use these tips to stay organized:
- Digitize receipts and store them in a dedicated folder.
- Use accounting software to categorize expenses.
- Archive financial documents securely for future reference.
A well-organized system saves time and is likely to reduce ATO penalties and interest. The ATO are more strict on requiring BASs and tax returns to be lodged on time – if your data is disorganised, this will delay the time it takes you to provide your small business accountant with the data that they need – and more likely to be hit with ATO penalties and interest.
8. Outsource When Necessary
If bookkeeping feels overwhelming or time-consuming, consider outsourcing. Hiring a professional bookkeeper or small business accountant can:
- Free up your time.
- Ensure compliance with tax laws.
- If you hire the right professional, they can provide expert insights to allow you to grow your business.
Think of it as an investment in your business’s long-term success.
Efficient bookkeeping workflows are the backbone of a successful small business. By automating tasks, standardizing processes, and staying organized, you can ensure your financial data is accurate. Whether you handle bookkeeping in-house or outsource it to a small business accountant, such as Nobel Thomas, the key is to create a system that works for you.
