Of all the facets of business, bookkeeping and accounting are often considered the most cumbersome and tedious. Especially for professionals, small business owners, and digital nomads, the marketing and compliance area of business can take up a lot of time.
This can cause irregularities and inaccuracy in bookkeeping. Due to the inherent non-revenue generating nature of bookkeeping, inexperienced location independent business owners often make the mistake of considering it avoidable until the due date of taxes. This results in the unavailability of timely data required for accurate decision-making, which may cause colossal damages to your business.
Bookkeeping requires a disciplined and systematic approach to avoid rushing during the end of the financial year. Well-maintained books of accounts provide immense help in management decisions using periodic reports. It also assists in working capital and liquidity management.
Aside from this, there are a lot of monthly/quarterly/yearly return filing and compliance due dates as per the direct and indirect tax laws, and other regulatory requirements. All this shows the importance of timely and periodic maintenance of books of accounts.
However, maintaining your books isn’t a complicated task, provided you have a working knowledge of bookkeeping and use the right software. Although if you are totally unfamiliar with bookkeeping or you don’t have time to do it yourself, it is advisable to take help from a professional like us.
Now, let’s take a look at various components of bookkeeping, its importance, the maximum preparation intervals, and how we can benefit you in those services.
1. Registering the Day-to-Day transactions of the business in the book of accounts
Real-time entry of daily business transactions such as sales and purchases, receipts and payments, and expenses is advisable for a continuous track of business activities, and they are an important element of internal control of your business’s finance.
These routine transactions can be initially recorded in their respective daybooks and subsequently entered into the bookkeeping software at weekly intervals, depending on the size and management requirements of the business.
If the volume of transactions is too high, a professional bookkeeper may be appointed for daily updates in the software. Software programs such as QuickBooks allow simultaneous access to owners and accountants.
Regular entries of daily transactions allow management to generate various kinds of reports like sales reports, expense reports, or receivables/payables reports at any point in time.
For location-independent businesses and new digital nomads, this is imperative to avoid incorrect decisions which can prove to be fatal to your business in the beginning.
2. Maintaining Payroll
Payroll taxes and compliances around the world are some of the most stringent laws. In order to have a smoothly operating business, it is vital to have smooth HR management.
For a location-independent business, this can prove to be difficult. But by using proper software and a little professional help, maintaining payroll and timely payment of employee taxes with return filing becomes an effortless task.
In most countries, payroll is required to be maintained monthly or fortnightly. There are various different software programs available for maintaining payroll which can help you in calculating monthly payroll taxes and generating returns. This data can also be easily imported into your accounting software like QuickBooks.
However, payroll taxes also have a scope of tax planning due to various options available in the laws. Especially for digital nomads having multiple tax territories, it is highly advisable to consult a specialized professional like us.
3. Importing bank transaction data in account books and preparing reconciliation statements
Having complete knowledge of your banking transactions is extremely important from the point of view of business management and internal financial control. Proper banking data also allows you to know your current liquidity status. Thus, all your bank account including credit cards and payment processors should be accounted for on a regular basis.
To make sure that your balance as per your books and actual bank balance matches, periodic bank reconciliation statements for each account have to be prepared. Various mismatches such as direct payments, interest income, etc. are present in the books of account. A rigorous exercise of finding each mismatch and correcting it is required at least once a month. For this purpose, professional bookkeepers might be given the monthly task of preparing the reconciliation statement.
4. Preparation of budget and making periodic reviews and changes
Any business, whether small or large, needs to prepare a budget and forecast statement to plan their business activities beforehand. Especially for small businesses and digital nomads, it is highly essential to have proper budgetary control in order to survive.
Preparing a budget needs a very calculated and expert approach. There is a lot of future income and expenses to be taken into account in advance, which may not be visible or imaginable to an inexperienced budget preparer.
The budget also needs to be flexible enough to encompass any future uncertain events. This requires critical thinking on the part of a budget preparer, so a professional should be hired to do this for your business.
All such budgets should be reviewed at regular intervals and compared with the actual books of accounts. If there is any deviation, reasons for it should be found and the budget should be amended.
5. Generating monthly income reports, financial position reports, and various other management reports
For small business owners and location-independent owners, it is essential to have a fair idea of their profit/loss and financial position at regular intervals instead of waiting for the year-end. Using proper software systems such as QuickBooks, generating profit and loss statements, and other reports becomes quite easy with these software’s.
This will help the management/owners to know the actual growth of the business compared to their budgetary estimates and to look for the reasons of deviation if any. This also helps the owner/management to make amendments to their future plans accordingly.
An improved forecast is also very important for various stakeholders such as investors or creditors in their future decision-making.
However, for an accurate monthly profit and loss statement, adjustments for a lot of accrued incomes and expenses have to be made such as interests. For this purpose, it is better to have the help of a professional.
6. Maintenance of tax data and estimates, preparation, and filing tax returns
Taxes and other regulatory laws are the most unpleasant aspects of business management. However, in order to avoid heavy penalties and fines, it is crucial to follow the rules by calculating and paying all the applicable taxes accurately and before their deadline.
A lot of small business owners and digital nomads are hesitant to appoint tax consultants in order to save money, but they lack knowledge of the applicability and time limits of various tax and compliance laws. This results in fines and penalties which can severely harm their business.
Various direct and indirect taxes such as income tax, VAT, etc. have different monthly and/or yearly tax payment and return filing deadlines. Apart from that, according to the type of business, there are a lot of compliance laws applicable. These laws also have filing requirements with different deadlines, and accurate knowledge of these is required.
Accurate records and timely calculation and payment of applicable taxes require a lot of time and effort, even for a small business! There is also a lot of tax planning that needs to be done in order to save as much money as possible.
It is highly improbable that a business owner will find time to study and plan all the tax and compliance laws. Thus, it becomes a necessity to have the help of a professional tax consultant on your side.
If you are a digital nomad that has multiple tax jurisdictions, then the above process becomes much more complex. In such scenarios, there is a need for specialized experts like us to help you get your taxes sorted in the proper way.
7. Annual financial statements
Annual financial statements include profit and loss statements, balance sheets, and cash flow statements. These statements provide a complete picture of the business’s financial position, income, and liquidity.
For small businesses, bookkeepers and accountants can also prepare the annual financial statements or can assist the professional accountants.
Bookkeepers will have complete knowledge of the nature of the business, books of accounts, and any amendments to be made in them. This information is essential in the preparation of true and fair financial statements.
From this article, we can see that even for a small business, hiring a professional bookkeeper can be of great help. However, there is no need to delegate all the above tasks to a bookkeeper.
Many of them may be done by the business owners themselves by just having a little knowledge of bookkeeping, practice, and discipline.
And the tasks that you can’t handle by yourself… well, that is why we are here to help! Shoot us an email and we would be happy to get your business’s bookkeeping on the right track.
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We hope you have enjoyed this article. If you have any further questions please leave us a message below and we’ll get back to you as soon as we can.
NOTICE: The content of this article is not to be considered as a legal opinion or tax advice. Wanderers Wealth does not hold itself out as a legal or tax advisor. If you want to receive a legal opinion or tax advice on the matter in this article please contact us directly and we will refer you to a legal practitioner.