7 Bookkeeping Tips for Small Businesses
A successful business owner is one who keeps their business on track and turning a profit. But if you fail to focus on your accounting tasks, your company can quickly sink before it has the chance to grow. To help keep your books on a sound footing, learn some bookkeeping tips for small businesses.
Businesses of all shapes and sizes need to keep their books clean and accurate, resulting in a more efficient, streamlined operation. The right bookkeeping tips can make all the difference in your business — whether you're just starting up or have been running for years.
Use these 7 Bookkeeping Tips to ensure your books are accurate from the start of your business.
1. Keep personal and business finances separate
In order to manage your business and personal finances separately, it is necessary to keep one set of records for each. Business and personal expenses should be maintained in separate bank accounts. Keeping personal and business expenses separate also helps you stick to your business budget as you're not liable for under-reporting your income or defrauding the IRS. Because of this, maintaining two separate bank accounts can help organize accounting records easier.
Setting up a business bank account can also help your company. A business bank account can assist you in the following ways:
Maintain your company's budget.
Sort accounting records
Keep your company's finances in order.
As a small business owner, you have just as much power as everyone else. You have the ability to make or break the success of your company and how much money you make. This means that no matter what kind of company you're in — whether it's a sole proprietorship, a partnership, or an LLC — you must separate all accounts that relate to your business activities from personal ones.
2. Automate as much as possible
There are many ways for small business owners to automate their accounting processes. But one of the most efficient ways is by using accounting software. Accounting software can be a game-changer for your business as it will allow you to spend more time running your business, and less time manually recording transactions. Consider storage, accessibility, and security when looking for accounting software. Make a list of things that are essential for your business, such as specific features, pricing, and reports.
Don't buy the software right away. Do your research to determine which software will best meet your and your company's needs.
3. Keep thorough records
3. Maintain meticulous records
Keeping and organizing accounting records such as business invoices, receipts, and expenses can make or break your company's books. If you fail to keep accurate records, your company's financial situation may suffer. If you prefer to keep paper records, keep them in a secure and safe location (e.g., a locked filing cabinet). Also, keep your paper accounting records organized by using various labels and sorting strategies (e.g., chronological order). If you dislike paper records, consider going digital instead. For safekeeping, keep paperless versions of accounting information on your devices or in the cloud. Consider keeping both a paper and paperless version of your accounting records to ensure their security. This way, you'll have a backup.
4. Set reminders for deadlines
It's easy to lose track of time and miss deadlines as a busy business owner. Another month or year has passed you by before you know it.
Set reminders to avoid missing deadlines and to keep your books ready for tax season. To avoid missing any upcoming deadlines, add business tax return due dates and other reminders to your calendar. You can even use a digital calendar (such as Google Calendar) to keep track of important dates and set yourself reminders.
Plan ahead of time and budget for your business taxes. This way, you can pay your taxes on time and avoid penalties for missing deadlines.
5. Leave an audit trail
The audit trail is a set of documents that back up the transactions you record in your books. Your trail can help you in tracking down transactions and confirming their accuracy. Purchase orders, invoices, and estimates are examples of audit trail documents. You might hear it called a “control document” or “back-up record.” To ensure your small business accounting records are as accurate as possible, consider keeping an audit trail.
6. Track business expenses
Certain expenses can be difficult to predict. Some expenses are predictable, while others are not. However, if you plan for and prepare for the unexpected, your company will fare much better in the long run. Keep a detailed record of all your expenses, such as supplies, inventory, insurance, and utilities, in your books. Also, devise a strategy for dealing with unforeseen expenses. You'll be able to better predict larger expenses and avoid being caught off guard in the future.
7. Keep your books at the top of your priorities
You have a million and one things to do as a small business owner. It's tempting to put your books aside in order to focus on running your business. Prioritize your books if you want to keep your business on track for success and your financial ducks in a row.
Keep your books up to date and organized from the start. If you avoid your books on a regular basis, you will soon find yourself buried in small business bookkeeping. Make time to review and update your books so that you don't have a backlog of accounting tasks.
Enter transactions into your books on a regular basis (e.g., once per week). If you keep up with your accounting on a regular basis, it will become less of a chore.
Head over to Facebook to let us know what you think about this blog post! 📈 🕸 Let us help you keep your business on track. Schedule a free consultation today!