Many small business owners treat bookkeeping as as task they hire an accountant to do just before the final tax deadline.

In actuality, keeping up-to-date books is essential to helping small business owners run their operations more efficiently and cost-effectively.

Whether you do your own books or use a professional service, these four (4) simple tips can help keep you on track.

TIP 1: Track what you spend

1. Track and sort your purchase receipts.
2. Create a system so you can find receipts when you need them.
3. Separate receipts into accounts to keep track of income and expenses for specific customers and/or projects.
4. Record receipts in your ledger–paper, computer, or both–to ensure you have a running total of your expenses.

TIP 2: Track what you’re owed

Every small business owner has horror stories about bills that were mislaid or lost and customers who were surprised to learn that they actually owed money.

1. Bill your customers promptly when a job is completed.
2. Track who owes you money, and remind them, at least monthly, to pay you. If needed, separate payments into accounts to monitor earnings from different activities.
3. Record payments promptly. Some customers take offense at being double billed.

TIP 3:Compare earnings to expenses

Tally earnings and expenses on a regular basis–daily, weekly, monthly, or quarterly–depending on the size of your business. Then compare the two. This is where having accounts to track specific activities or expenses can be particularly helpful, since it helps identify products or activities that are profitable, as well as changes that could improve profits.

TIP 4:Monitor cash flow

When the flow of payments into your business happens on a different schedule than the flow of money out, usually in the form of expenses, you can end up owing more money than you actually have on hand. This is usually referred to as having a “cash flow problem.”

Stay on top of the flow of income and expenses so you’ll know if cash flow is becoming a problem and work with a lender or tap into other resources to cover shortfalls.

Monitoring cash flow can help determine if you need to create policies to encourage clients to pay on time, change how you do your billing, or even modify your pricing. It can also help you decide when to make an optional purchases or capital expenditures.

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