Balancing the books is something every business has to do, but if you are just getting started as a freelancer, contractor, or sole trader, it can be a daunting prospect.
There’s no question that getting to grips with bookkeeping duties involves overcoming a bit of a learning curve. But with the right tools and a bit of time and effort, it’s a process that anyone can conquer.
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Making and maintaining records
Keeping track of your business finances is not just useful from an administrative perspective but is also a legal requirement so that you can pay taxes and prove your earnings as necessary.
In the old days, businesses would record the ebb and flow of cash in a physical ledger, but in the digital age, there are a huge number of software solutions designed to simplify this.
For example, there are bookkeeping companies like MYOB for a sole trader to use, which bundle online accounting software with other business money management solutions.
If your business affairs are very simple, you might be able to get by with an entirely free spreadsheet solution, such as Google Sheets. But it is worth picking a premium package because of the increased convenience and flexibility.
As mentioned, bookkeeping is essential because it is all part and parcel of the tax filing process. While you can attempt to tackle your taxes solo, it makes more sense to seek the services of a qualified accountant for this purpose.
Accountants aren’t responsible for the bookkeeping itself but will take the reins when it comes to completing returns and ensuring that their clients are being taxed as accurately and efficiently as possible.
It’s also worth pointing out at this point that you can even hire a professional bookkeeper to keep your records up to date, but this is usually a step worth taking only when your business has grown substantially.
Taking note of the right figures
While the main thing that bookkeeping duties focus on is cold, hard cash, including the money coming in and going out of your business, there are other important aspects you should consider recording.
This includes keeping an inventory of the goods you stock, in case your company is involved in retail or has some other sales aspect attached to it.
You should also note any expenses you have incurred, in order that they can be claimed back against your eventual tax bill, as long as they are allowable under the law in your region.
The more your operations expand, the more your bookkeeping will grow along with it to chart the most important metrics and figures involved in its operations. As mentioned earlier, when you get to this point, it will be worthwhile getting a professional bookkeeper involved, or else too much of your time will be monopolized.
Following best practices
It’s important to sidestep bookkeeping pitfalls that often outfox beginners, but what exactly are the most common errors?
Procrastination is a big one, as the intimidating idea of completing bookkeeping tasks as a beginner can cause you to leave it to the last minute, which only intensifies the stress and panic involved. It will be easier if you keep up to date with these responsibilities regularly, minimizing the workload in the long run.
Another important point for newcomers is that you should separate your business finances from your personal finances as a priority, or else things can quickly get messy.
There’s no need to be scared of bookkeeping, even if it can seem complicated at first. Working with experts will steer you around its major obstacles and let you keep your business finances on an even keel.