It can be very difficult to keep good accounts while working from home. Part of the difficulty in working from home is creating a separation—physically if possible and psychologically—from the rest of your home life. This can take as much effort if you live alone as if you have a partner, roommates, or an extended family. How do you distinguish between your personal living costs and your business costs?
We’re in a time of unprecedented uncertainty. In the middle of a global viral outbreak, you were told or asked to work from home—and you’ve never or rarely had to be productive where you live before.
What do you do?
Why you need to keep good accounts
Millions of small business owners are masters at creating great products, building effective teams and winning over customers. However, many business owners fail at basic bookkeeping.
Business entities rely on accurate and reliable bookkeeping for both internal and external users. it not only helps you make solid decisions now and plans for your company down the road, an efficient bookkeeping system saves time. Notably, it prepares you for government audits and helps prevent fraud.
Proper bookkeeping gives companies a reliable measure of their performance. It also provides information to make general strategic decisions and a benchmark for its revenue and income goals. In short, once a business is up and running, spending extra time and money on maintaining proper records is critical.
As the business owner, if you don’t understand the different types of accounts required to organize your finances, measuring the success (or failure) of your efforts will be futile.
You can choose to go the DIY route and use software like Quickbooks or Wave. Alternatively, you could use a simple Excel spreadsheet.
Steps to Success
Get a system in place,
The foundation of solid business bookkeeping is effective and accurate expense tracking. Firstly, an accounting system helps organize your financial information. You should be using an accounting system to keep track of expenses, income, and other activities. Basically, this helps you keep an eye on all data that affect the finances of a business organization.
Secondly, an effective accounting system helps you to monitor the growth of your business, build financial statements, keep track of deductible expenses, prepare tax returns, and legitimize your filings.
Consequently, allocate a regular time to work on your sales and expenses every day. This period will be used for recording transactions, creating invoices, recording sales and purchases. Additionally, you can issue Credit notes and receipts. This makes your work easier in the long run.
Set up a chart of accounts
The easiest way to record and track your transactions is to set up a chart of accounts:
- Create a spreadsheet or use an online service or software package such as Quickbooks.
- Allocate separate transactions to their corresponding category of income or expense. Facebook ads are recorded to “Marketing’, your mobile bill to ‘Telecom’ and so on.
- Input transactions on a daily or weekly basis.
Separate your business finances from your personal finances
The most important thing you need to start separating business and personal finances is a business bank account. It’s up to you whether to decide to open a business checking or savings account. But we’d recommend starting with a business checking account, since it’s the cornerstone of any company’s financial foundation.
With a dedicated business account, you can pay bills, deposit cash, collect invoice payments, and buy equipment without having to run a cash-only operation, or by having to pull from your personal bank account.
Paying yourself a salary from your business creates a more formal boundary between your business finances and your personal finances. Simply take money from your business bank account and transfer it to your personal checking account once or twice per month, just as if you were working for somebody else. By paying yourself a salary, you establish when and how you will take money out of your business, rather than just pulling from your business finances whenever you need to.