What Exactly Is Bookkeeping And Why Is It Important?

We have been told time and again about the importance of bookkeeping, but we always find ourselves procrastinating because it is the job we always have a love-hate relationship with. Bookkeeping is defined as the storing, recording and retrieving of financial transactions of an organisation. It includes tasks such as sales, receipts, payments and purchases. There are several methods involved in bookkeeping, but one thing is for sure, we cannot maintain the finances without bookkeeping.

It helps you manage your cash wisely.

Part of operating your business is to manage customer and supplier accounts. With bookkeeping, you will be able to create a business player, track deposits and monitor payments. You will also know how to make sure that every dollar spent is intended for your business. When you update your books, you will know the financial state of your business. If you have an outstanding bill, income information, unpaid invoices or payroll estimation, you can gain access to these by simply looking at your financial statement.

It helps you make a decision

Thinking about expanding or growing your business? It will not be easy without knowing your financial performance. Banks will not trust you if you have unpaid bills and delinquent accounts. If your records show that you have the ability to pay a loan, the bank will not have any second thoughts of approving your loan application. However, if your records indicate that you are running low on capital, it will be difficult for you to take out a loan.

It protects your small business.

Can you imagine operating your business without hiring a qualified person to take care of your books on a daily basis? Can you be confident that your business is on the right track if no one ensures that your checks will not bounce and you have enough capital for expansion? Will you be able to have a good night’s sleep knowing that you are falling behind your payment schedule as you do not have a bookkeeper to remind you when your payment is due? Not having up-to-date records will run you the risk of losing money. Business growth opportunities are missed and payments will not be made in a timely manner.

Bookkeeping should not be underestimated as it is an integral part of every business regardless of the size. If ever you find yourself ignoring bookkeeping, think about its repercussions. Without bookkeeping, your business will suffer from the lack of financial stability for sure.

3 Reasons Why Your Business Should Automate Bookkeeping

Automation is one of the biggest trends that made a mark in the bookkeeping industry and with its rapid growth, it is no surprise that many business owners no longer hesitate to grab hold of this new opportunity to keep their financial activities in check. Although human adoption seems to be slower as some businesses are still keeping traditional bookkeeping systems, incorporating automation into your workflow makes a huge difference. Here are three reasons to introduce automation to your bookkeeping system.

1. Save Money

Small business owners try to reduce expenses by handling all of the tasks as much as possible. However, as the company grows, businesses find it difficult to keep up, hence a bookkeeper becomes a need. One bookkeeper cannot handle all the workload and hiring another bookkeeper means spending more money. Automating your workflow will help you standardise your process so you don’t have to worry about your financial status. The information you need from your monthly bank statements will be available for download.

2. Save Time

Reducing repetitive tasks is one of the benefits of automating your bookkeeping system. Imagine how much time you can save from doing away with manual jobs. Automated bookkeeping allows you to generate accurate information that you can access and review at your convenience. However, it is important to remember that automated coding does not necessarily guarantee accuracy as you still need to review monthly transactions. Keep in mind that the purpose of automation is to finish a bookkeeping task the quickest way possible, but checking information to ensure there are no missing transactions is still required.

3. Freedom

The best thing about automated bookkeeping is that you will no longer have to wait for your bookkeeper to provide you information because you can gain access to valuable information using a cloud app. You can even meet with clients monthly to discuss trends and results based on the financial reports you have gathered. As a result, you can set a plan so you can handle cash flow wisely. Keeping the books up to date will never be a problem because it only requires minimal management. With less time and attention required in keeping numbers up to date, you can surely take care of other aspects of your business.

One thing that deters some small business owners from automating bookkeeping is the fear of replacing the bookkeeping work. Since you switch from traditional to modern bookkeeping, you need to learn new processes to appreciate the benefits that automation provides. In the long run, business owners will be able to understand how automation can improve their lives.

4 Reasons Your Small Business Failed To Grow

Most small business owners have big hopes and dreams about growing their business, but only a small fraction of entrepreneurs reach the peak of success. Too many of these businesses fail. It is a sad fact that 60% of small businesses could barely operate within the first three years of starting according to the Australian Bureau of Statistics. Sole proprietors have much lower survival rate than other types of business ownership.

Since there are only a few businesses that flourish, what does it take to survive and thrive? Successful business owners have a set of best practices that they regularly follow: investing in the right business tools, setting goals, planning for business growth and the list goes on.

In cases where business fails to grow, there are top 4 reasons they could not survive:

1. Lack of systems and process

Small businesses have to keep track of every transaction especially if it involves money. Having systems and processes in place ensures products and services are consistently managed. Small business owners are responsible for inventory management, accounts payable, accounts receivable, marketing, payroll and more. Unlike large companies that can already afford to hire people to do these jobs, small businesses have to juggle these tasks at the same time. There are three things that failed small businesses fail to implement: comprehensive bookkeeping process, customer relationship management system and inventory management system.

2. Not having enough funds

It is difficult for business owners to open doors to new customers without sufficient funds. Most businesses fail because they underestimate the amount of cash it takes to maintaing a business. Financing supports inventory purchases, business expansion, startup costs and business improvements. It is imperative that you plan the amount of capital that starting a small business requires. This way you can anticipate other expenses without breaking the bank.

3. Failure to adapt

Even if your small business has savored its initial success, it does not guarantee continued success. When you fail to monitor industry trends and changes, this is when you start falling behind your competitors. It is not uncommon for small business owners to wear many different hats and struggling with managing their time. This is why preparing for the changes becomes takes a backseat. When one area becomes obsolete, all aspects of the business become affected. Small businesses must be prepared to beat the competition by staying ahead of market trends.

4. Not using modern technology

When it comes to marketing your products and services, taking advantage of modern technology is necessary. It is difficult for small businesses to compete with big company because they do not have data-driven marketing. Even a simple task such as creating a website matters when it comes to keeping your product available to prospects. If your business does not have a mobile-friendly website, it will be difficult for you to keep up wth the giants in the business industry.

The Difference Cloud Bookkeeping And Traditional Methods

Cloud computing is one of the business trends that continue to thrive. All kinds of businesses utilise cloud not only to connect with customers but also to make business practices more efficient. In a study conducted by Computerworld, 42% of IT decision makers increased spending on Cloud computing in 2015.

Bookkeeping is one of the aspects of your business that will benefit from cloud solutions. You can manage your finances easily and access data anywhere.

Cloud Bookkeeping Vs Traditional Bookkeeping

Although cloud technology is a buzzword, only a few will be able to understand what it really does to your business. Cloud stores data and other essential financial information, making it available to business owners and employees so long as there is access to the Internet. Unlike traditional bookkeeping software that requires one dedicated hard drive to store or record financial data, cloud bookkeeping software is Internet-based. With that said, it does not affect your existing storage.

When it comes to costs, cloud software is more affordable because it does not require additional software or hardware to run it. In the event your computer crashes, your data will remain secure because cloud-based bookkeeping programs will back up your data automatically. You can also use the cloud-based solutions on many different platforms, something that traditional bookkeeping software cannot offer.

When can you maximise the benefits of cloud-based software?

As they say, cloud-based solutions are not for everyone. When you are making a buying decision, it is essential to assess your business needs before you invest in cloud bookkeeping software.

  • If your company has a limited budget, investing in cloud bookkeeping software is the way to go because it costs less over time.
  • Business owners who have remote workers can also take advantage of the flexibility of cloud-based solutions because it can be accessed anytime and anywhere.
  • For small companies that are concerned about security, many cloud-based programs can offer increased levels of security to keep your data protected against threats.

The fear of embracing cloud technology

For business owners who are not familiar with on-premise financial system such as Cloud ERP, letting go of traditional bookkeeping methods is a difficult decision to make. Some concerns being raised include availability, security, ownership and location of financial data, software updates and getting used to a new financial system.

However, cloud does not give organizations a hard time adapting to change. Even smaller firms can use cloud bookkeeping technology without undergoing extensive training. It also offers a good number of benefits such as scalability and flexibility. You can even gain better control of your finances because information is available in real time.

Startup Failure: 4 Reasons Your Small Business Struggle To Survive

Yesterday you were filled with enthusiasm, excited about the idea of running your business, but that excitement was abruptly replaced by disappointment as your boat suddenly sinks to the bottom. What have you done to make your business take a nose dive? What should have been done to ensure business survival?

It is disheartening to discover that 8 out of 10 small business owners fail within the first 18 months according to a study conducted by Bloomberg. At an alarming rate of 80%, you cannot help but ask: What did I do or What did I not do?

Another study also discovered that only 50 percent of small businesses barely make it to the five-year mark and only one-third survive the tenth year of running their business.

According to Forbes, each month, more than 500,000 businesses are started. Unfortunately, many of them fail.

Here’s why:

1. Poor Management

Putting up your own business is not a decision you make on the spur of the moment. It takes years of planning and analysing. Everyone can say they have what it takes to be a business owner, but once they are confronted by problems with cash flow, taxes and payroll, they choose flight over fight.

Business management encompasses a lot of things. You can be good at selling, but hey, there are still other business aspects you should not overlook such as hiring and managing employees, purchasing, production and more. Did you make the cut?

When you start your own business, educate yourself on skills you lack. Also, do not forget about your employees. Without them, you will not be able to accomplish your goals.

Employee engagement should not be ignored. Be mindful of the leaders you hire to manage your employees. Do they encourage productivity or are they the reason for employees’ lack of motivation?

2. No Strategic Planning

A business plan is critical to all businesses. Even if you are a seasoned entrepreneur, you are not going to be immune to problems. A business plan will help you analyse workforce needs, competition, budget, promotional activities and other business components. If you decide to expand your business, bankers will also request a business plan from you before you can secure additional capital.

3. Starting A Business For The Wrong Reasons

What is your primary reason for starting your own business? Is it making a lot of money? Pursuing your passion? Spending more time with your family? These are benefits you reap from being a business owner, but you might have failed to realise that it will take years of hard work before you can savor success. When starting your own business, you need to have the right reasons: love and passion for what you will be doing, drive and determination and ability to face failures.

4. Insufficient Operating Funds

You may have the passion and skill to become a successful business owner, but without sufficient capital, launching your business will be a big challenge. Although it takes a year or two for your business to finally take off, you should also take the costs of staying in business into consideration.

Self-made millionaires have a positive mindset, determination and drive to succeed. They also view mistakes as an opportunity to learn and grow. There is no secret sauce to becoming a successful business owner. If you think that failure is never an option, you will do whatever it takes to succeed.

Which Bookkeeping Software Is Right For You?

Bookkeeping may not be your top priority because your small business is not as complicated as large and established companies. One mistake that business owners make is taking bookkeeping for granted for the belief that it will not hurt a small business.

However, with the stiff competition going on, no business, regardless of size can remain complacent. If you dread bookkeeping, you no longer have to spend your day working on manual and repetitive tasks. Bookkeeping software will make your daily  life easy. Unfortunately, choosing the right software can be complicated. Narrow down your options by considering the following points.

1. How much are you willing to spend on bookkeeping software?

Before you can explore your options, you will need to analyse your budget. Depending on your business needs, the price will vary from feature to feature.

The more features offered, the more it costs. Avoid choosing software loaded with features if you are not going to use all of them because it will be a complete waste of money. Some software providers offer a free trial or demo so you will know the features you need for your business.

Aside from the features, you will also need to check how you are going to pay for the service. Additional updates may also require an extra fee. Find out if you can purchase packages with a comprehensive pricing structure. For most business, paying a monthly fee is the most preferred payment term.

2. Is it user-friendly?

Not everyone enjoys manual to digital transformation. This is why choosing the best software for your business also involves knowing how to use it. The right software will enable you to learn bookkeeping over a short period of time. You do not have to spend your workweek learning bookkeeping.

The right software helps you track your income and expenses. It will also help you record your daily transaction. If you cannot make smart financial decision, it only means that your software solution is not doing an effective job.

3. Can you access your financial information whenever and wherever?

The digital era makes it easy for business owners to run their business even outside of the office. Flexibility brings convenience and as a small business owner, your software selection should also depend on the application’s ability to give you access to your financial information on your mobile device.

Aside from instant access to your reports, the software should also give you the option to share the information with your bookkeeper and business partners. While applications capable of giving you access to information from any device is a huge advantage, security must also be prioritised. Confidential records must be kept safe and secure. It will be useless to purchase bookkeeping software if it cannot create layers of protection to sensitive data.

Once you provide answers to these questions, the process of choosing bookkeeping software will be a lot easier for you.

How To Protect Your Business From Fraud?

Small businesses are vulnerable to fraud and because there are too many priorities to think about, the company’s level of security has to take a backseat. Aside from investing in high levels of security, there are also other practices your company should follow to reduce the risk of fraud.  There are many types of fraud that a small business may face. Fortunately, there are ways to avoid or at least minimise them.

Set Boundaries

Shared passwords increase the risk of fraud. Setting clear boundaries decreases the likelihood of fraud. A code of ethics may be difficult to follow for small business owners. If expectations are not properly set, it will be difficult for you and your employees to draw the line. Boundaries do not only protect you against fraud but your employees as well. Putting rigid policies in place will prevent instances in which you say one thing and enforce another. A code of ethics also take you in the right direction in the event matters are taken to court. When you have encountered breach of agreement, the first step you will take is to document it.

Verify Reports and Receipts

A bookkeeper can keep things organised, but this does not mean that you will no longer actively participate in reviewing reports. Being hands-on allows you to prevent oversight. If transactions are not authorised, the reports will clearly show where your business is headed. Deposits, invoicing and even outside audits must be properly verified. In the long run, you will be able to uncover fraud or even prevent it from taking place as your employees are fully aware you are also doing a personal audit.

Perform a Background Check

It is not easy to hire employees especially for small business owners. A basic resume can be peppered with impressive descriptions to win the nod of employers. References are important as it enables you to know a potential employees work ethics. Before you consider hiring an applicant, the conversation must be enough for you to gauge their character. More due diligence is essential if the job requires additional responsibility.

It takes a lot of hardwork to run a small business successfully. Fraudulent transaction is one thing to worry about. There are even businesses that discover fraud when it is already too late. Aside from breaking up essential tasks, setting clear expectations is also important. Violations of polices must not be tolerated so employees know you are serious about implementing stricter rules.

How To Stay Ahead Of Competitors As A Small Business Owner

Even if you are a small business owner, it does not necessarily mean that you have no reason to stay ahead of your competitors. If others have cutthroat instinct for survival, you too should have some strategies that can help you thrive in a competitive business world. Even the best ideas can flop. This is why having a competitive advantage is one way you can pull ahead of your competition. Here are four techniques that can help you outperform competitors.

1. Identify strengths and weaknesses.

Your competitor may have an edge over your products and services, but this does not mean that you cannot emerge victorious. Every company has a weak point and this is something that you can use to outperform them. A company with a great product may have the poorest customer service. Find out what makes your company a better choice. It is also important to consider marketing and presentations. Even your prospective customers should know the importance of these selling points.

2. Keep customers involved.

Your product may be great today, but it can be easily forgotten the next day once they find a better replacement. However, if you are going to ask customers how you can enhance your product,  your competitors will be the last thing for you to worry about.

3. Choose large clients

One reason small business owners should go after larger clients is that they can help you yield better results such as increased revenues and more business. Compared to small companies that may require hand holding, larger clients are easier to service. You can also improve your credibility and even meet potential prospects. If the thought of approaching larger companies intimidates you, think about the long-term benefits you can get such as moving faster and gaining better ideas.

4. Keep track of your financial health

Any profitable business should never remain complacent just because of a good business performance. Your competitors can be like a thief in the night that will steal your position at the drop of a hat. If you are going to allow other businesses to pull ahead of you, growing your business will be a challenge. There is a good reason you have a good bookkeeper and that is to keep track of your financial health. Make sure you are checking your financial statements so you will know if your business is doing well.  Ask your accountant or bookkeeper about some recommendations to improve your business.

Change is also essential to stay on top of your game. This means that if you are still into traditional business process, you need to up your game by embracing technology.

Cash Flow Survival Tips For Small Business

A business cannot survive without a steady flow of cash. In spite of the profits it makes, the lack of cash flow can result in losing your business. Why is cash flow management important? How can business owners ensure that there is enough money for future investments and monthly expenses? Proper cash flow management is the secret to having a steady cash flow. Sure some businesses have secret sauce to ensure survival, but there are simple rules that are crucial to the survival of every company. If you manage your cash flow intelligently, you will be able to reduce error, plan for the future and manage your company’s spending habits. A few survival tips will not hurt:

Track, track, track

Handling your finances requires tracking everything so you will know what is coming in and what is going out. Simple oversights will result in losing track of your expenses. Tracking everything means you should monitor how much you are spending on company lunches and travels in real time. When you have a real-time view into cash flow, you will be able to have the ability to manage your cash flow efficiently.

Gain deeper understanding of your financial data

It is not enough that you generate a financial report because you should also understand whether or not your business is running smoothly. It is easy to misunderstand data unless you scratch beneath the surface. Got some questions? Ask your bookkeeper rather than assume that everything is doing perfectly fine. When information is outdated, the chances of making costly mistakes also increase. Make it a habit to consolidate your financial data to get accurate information. If you obtain financial information from multiple sources such as handwritten files, excel spreadsheets and some online tools, you can get confused in the long run.

Automate bookkeeping processes

Another reason your cash flow management is in chaos is due to manual bookkeeping processes. There are aspects of bookkeeping that you need to automate such as generating invoices. As your business begins to grow, it will be difficult for you to track clients who have and have not made payments. Automation bypasses the tedious process.

Evaluate spend

Are you doing good at spending? Do you always see to it that you renegotiate contracts and get a real-time view of your cash flow? If you want to drive growth, you need to know how to spot business trends. It is also necessary to formulate strategies that will improve your overall business performance. Costly mistakes can affect your business. However, if you are well-prepared, there is no other way to go but up.

5 Reasons Small Business Needs Bookkeeping

Tracking expenses is essential to all businesses and hiring a bookkeeping service is one way to make this task much easier. However, for small businesses, bookkeepers are not a priority because of perceiving bookkeeping as an additional expense. If you rely on DIY bookkeeping, there will be more room for mistakes you may tend to overlook essential information. There are good reasons bookkeeping is a must for your small business:

1. Transactions are classified.

Accuracy is important when generating financial report and spending time keeping books must also be a priority. A bookkeeper is capable of entering and classifying transactions as part of your pre-tax planning. Bookkeepers will also check your books regularly so you will not worry about payments come tax time.

2. You save time.

There are many problems associated with DIY bookkeeping such as failing to focus on other more important areas of your business as you are stuck in entering transactions into your ledger. If you let bookkeeping professionals take care of this task, you can save yourself from spending too much time on keeping books. These professionals have a sound knowledge with bookkeeping software and you will not also miss other great opportunities.

3. Manage payroll easily.

Whether you are a sole trader or in a partnership, it is important to note that as your business grows there will be additional tasks that you need to handle and one of which is payroll management. This is one aspect of running your business that you should not ignore. It includes creating checkes and making sure that income taxes are deducted correctly. You cannot afford to make mistakes. This why hiring a bookkeeper is important when handling payroll.

4. Prevent paying bills late.

It is easy to overlook bills when you are busy. Paying your bills may be a simple task, but it is mostly one of the obligations often forgotten. It can result in major and costly consequences. If you hire a professional to remind you of upcoming payments, late payments will no longer cause problems and worries. You just need to give access to your online accounts so the bookkeeper can check statements and even make payments online.

5. Generate reports when you need them.

Many small business owners are not completely aware of their true financial state. This is because they do not have access to the financial reports. Bookkeepers must make reports available to business owners on a bi-weekly basis so business owners will know how their business is doing. Reports also provide an idea where business stands. Problems are also prevented when financial reports are regularly checked.