By: Flaka Ismaili    August 12, 2021

First, it ensures that you’re deducting the right amounts when you file your taxes and second, it allows you to prove your deductions should your business be selected for a tax audit. If you’re using a tax filing software you may have the option to organize and store receipts electronically. At the end of each day, make sure the money in the bank matches the receipts. By monitoring your transactions daily, you’ll be able to catch errors, fraud, and unexpected fees before it’s too late.

• This process can be as simple as preparing an invoice for a customer to setting up your electric bill to be paid.
• Many bookkeeping software options automate the tracking process to eliminate errors.
• Entering data into spreadsheets and reconciling numbers manually is so old school.
• The profit and loss statement, balance sheet, and cash flow statement are your most important financial reports.
• With accurate bookkeeping, you can tell how much your business is making in terms of income and track your spending to ensure that you have enough cash on hand to cover your business expenses.
• One of the great things about using a software is that the debits and credits involved in creating an invoice are all handled behind the scenes.

While the cash-based method is the simplest to use, it’s not suitable for every small business. Take a look at the difference between cash and accrual accounting and the restrictions. Your business requires your full attention, and sometimes your best choice is the easiest one—outsource the tasks you don’t have time for so you can focus on the work that really matters to you. A professional bookkeeper won’t be overwhelmed by the nuts and bolts of DIY bookkeeping, and their help allows you to focus on making money, not documenting it.

Recording Transactions

Even if you aren’t planning on growing any time soon, you need to have a sense of how much money is coming in versus what is going out. On top of that, you need the data used in bookkeeping to file your taxes accurately. Keeping up with the records in your small business might be a task you are willing and able to tackle yourself.

Whichever way you do it, it’s important to complete the process on a regular basis. If you’re using double-entry accounting, which is recommended, you will have a corresponding credit entry for any debit entry you make, and vice versa. As a small business owner, you have a million and one things to do. It can be tempting to push your books aside to focus on running your business. But if you want to keep your business on track for success and keep your financial ducks in a row, prioritize your books. When it comes to your books, keep a thorough record of all your expenses, such as supplies, inventory, insurance, and utilities.

• While many bookkeeping duties will be uniform regardless of your business type, some changes happen from industry
  to industry.
• QuickBooks accounting software can help you ease into the accrual method of accounting by ensuring that your records are accurate, based on information from your credit card or payment apps.
• However, it can be difficult to catch up if you fall behind on reconciling transactions or tracking unpaid invoices.
• You’re likely extremely busy, and many things might seem immediately more important than tracking your day-to-day finances.

They’re also the first thing lenders and investors will look at when examining your business’s potential. Keeping things separate helps avoid violating any tax laws that apply to your business taxes. It also keeps you out of hot water by limiting your personal liability in legal situations involving your business. This is by far one of the most important small business bookkeeping tips.Now that you’ve separated your accounts, it’s time to track all of your expenses.

Bookkeeping Tips: 15 Things Every Small Business Needs to Know

The obligations about your debt service are crucial in terms of solvency and credit. It’s important to do a detailed analysis to avoid missing signs that expenses are building up. If they creep up too heavily, it can take much longer to correct them and prevent losses in the long term. “Find someone you get along with and who will partner with you on your long-term goals rather than just filing your taxes,” Hattrup says. If you do decide to outsource your bookkeeping, both Eversmann and Hattrup have suggestions on what qualities to look for in an individual or a firm.

Do your own small-business bookkeeping

It’s surprising how many business owners have no clue if what they are doing is working until it’s too late i.e. they suddenly find themselves with no money and huge debts. There are some free bookkeeping software programs available if you are on a tight budget. I give a break-down here of the ones that are of excellent quality and are kept up-to-date. The business account can remain nice and tidy with only business transactions and the one regular drawing amount. This will also avoid the temptation to allocate a private expense to the business.

Bookkeeping Options for Small Business Owners

At the end of the accounting period, take the time to make adjustments to your entries. For example, you may have estimated certain invoices that are later solidified with an actual number. There are dozens and dozens of bookkeeping options available and the choices may seem overwhelming.

Traditionally, you would need to wait to receive your monthly bank statement and reconcile the transactions on the statement with those posted in your ledger or accounting software. The purpose behind completing a monthly reconciliation is to see what checks are still outstanding, post any bank transactions, and add additional charges such as account fees. You also need to understand what debits and credits are before you can start to enter any transactions. Any transaction posted in your ledger or your accounting software will be a debit or a credit. While the job of bookkeeper may appear similar (or the same) as an accountant, they are only similar on the surface.

She is a former Google Tech Entrepreneur and she holds an MSc in International Marketing from Edinburgh Napier University. You can go with the understanding your pay statement baseline plan, the Simple Start plan, for $30 per month. If you need more users, you need to move up to The Essentials plan for $55 per month.

Robust accounting software programs can be extremely helpful on this front, since they are specifically designed to help you track both one-off and recurring expenses. However, plenty of small-business owners utilize basic spreadsheets such as Excel or even rely on a pen-and-paper ledger. Start by deciding on the system you want to use, whether it’s an online program, paid software or a spreadsheet. Next, set aside a dedicated time either weekly or biweekly to review your bookkeeping, reconcile transactions and complete necessary data entry. Finally, you’ll want to decide how all receipts and documents will be stored.

Flaka Ismaili

More Posts