4 Hacks to Improve your Bookkeeping Experience!

If you start off on the right foot, you won't be crying when you have to do up your accounts. Worse still - lose money from it!

So the business is up and running, but you are not exactly sure how much $$moolah$$ is being made...

Bear in mind that all businesses are linked by a common thread - the need to record and compile finances on a regular basis, so that you - the boss! - can and will be in the know on the company’s profitability.

Most new business owners learn the hard way when they do not maintain their accounts at an early stage of their entrepreneurial venture, - it will transform into a multi-headed hydra!

The reasons for not doing so are wide and varied, either uncertain of how to maintain/prepare the accounts or choosing to focus on business development instead; but the end result is still the same, business failure occurs as the owners do not have a firm grasp on the finances of the company.

To make it easy, these are the 4 things I recommend you do:

  1. Keep a listing of all of your receipts and payments

  2. Categorise them

  3. Know the nature of the transactions

  4. Be consistent in how you treat each transaction and maintaining records

Keep a listing of all of your receipts and payments

Sounds simple but often overlooked!

This simple schedule helps to track your cashflows, the lifeblood of the business. It readily helps to answer 2 important questions all business owners have at the back of their head - Have my customers paid me? How much do I owe to others?

Categorise them

This is simply a listing of various categories which to classify your transactions, i.e Asset - Equipment, Liability - Accounts Payable, Revenue, Expenses etc

It is best to capture the unique transactions at the start, then plugging in these unique transactions under the “Others” categories, and thinking of reclassifying later when the amount gets bigger.

Be proactive in updating your Chart of Accounts, and create necessary categories when the situation calls for it, i.e when a new business activity (new transaction) becomes a recurring transaction.

Nature of the transactions

Be certain of the nature of the transaction, i.e does it go to the Balance Sheet or profit and loss statement ("P&L")?

I have encountered countless times when business owners record their purchases of equipment (for long term use) as an expense (in the P&L), rather than recording it as an asset (Balance Sheet). This "expense" is usually large and distorts your P&L, by understating your net profit. Now you see why it is important to know the nature?

Be consistent in how you treat each transaction and maintaining records

Consistency in how you record and classify your transactions is an effective way in maintaining your accounts. (Even if there are any errors at start, it will not involve too much work for anyone who is tasked to rectify the problem. The problem can be further contained when proper hardcopy documents (invoices, delivery/purchase orders, payment vouchers etc) are kept in good order.)

Hardcopy records can be a pain but they will be a great reference point to start should your accounts encounter errors. Don’t be a hoarder though, as the statutory requirement (in SG) to maintain physical records is 5 years!

I hope the above will help to assist in your venture into accounting for your business needs, but if all of it still seems to be an undecipherable jumble, we are only just a line away!

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