How often you update your business records depends on various factors, including industry type, number of transactions, size of staff, availability of time, and personal preference. There are a lot of good reasons to update the financial accounting records often and not a lot of good reasons to put it off. Five reasons you should consider upping the frequency of your book- and record-keeping:
Bookkeeping can be a time-consuming responsibility, and it is frequently cited by small business owners as one of the most dreaded drains on their time. Even though accurate financial management does take up valuable time, updating the financial records frequently can be a time saver because it prevents a mountain of unpaid bills and unsent invoices from piling up, which then will take many hours to sort through, send, and record. Spending a designated amount of time each day or week to attend to financial matters reduces the overall time needed and reduces errors caused by neglect, oversight, or missed deadlines.
Bookkeeping is more than a series of tasks to complete, but can also be a tool to learn from and gain insight about your business. Checking in often on your account balances and going over the week’s receipts and expenditures gives you the most up-to-date information about your cash flow and your business’s overall financial health. It allows you to budget and forecast more accurately and make data-driven financial decisions that reduce wasteful spending and increase profits. Regular bookkeeping also improves your general bookkeeping skills so that you can continually find ways to streamline and improve efficiency.
If you manage your business by yourself, you are likely familiar with the responsibilities of tax computation and filing. Many of the expenses for your business may qualify for a tax deduction, but you won’t know about them or have the receipts for them if your books are disorganized. Counting on memory is less than ideal and won’t provide you the documentation you need to get the deductions to which you may be entitled. Updating your records often, keeping a daily record of mileage, and scanning or uploading pics of your receipts ensure that you have easy access to these records when tax season comes around.
Financial mistakes can be costly. If your business incurs excessive fees or has unauthorized charges, you will want to know about them immediately so that they can be rectified; the longer they go unnoticed, the more difficult it will be to reverse them. Don’t keep paying for a monthly subscription or service that you are no longer using simply because you forgot about it and didn’t realize you were being charged. Updating the books frequently ensures that your account balances and records are always in sync and that you know where your money is going at all times.
While some tasks can be done quarterly or annually, you don’t want to wait that long to balance accounts and record transactions. Due dates for bills and estimated tax payment deadlines should not be missed because of careless bookkeeping. If you take care of the bookkeeping every week, you are less likely to fall behind or forget about contracted payment terms.
Daily or weekly updating of the business finances may seem excessive, but even for businesses with only a few transactions, frequent updating can be a good habit to start early so that you are prepared for growth with a system already in place. Not every bookkeeping task can be done on a daily or weekly basis, but some tasks that can be done as often as possible save time and improve efficiency:
· Opening and paying bills soon after they come in
· Filing and categorizing receipts
· Uploading receipts to digital storage
· Logging business mileage
· Creating and sending invoices
· Sending invoice reminders
· Reconciling bank balances and statements
· Reviewing business budgets
Very little is gained by putting off the bookkeeping until the final moment. Adding in a few minutes each week to get some routine bookkeeping items off your desk can add up to hours saved each month.