In this article, we’ll explain several bookkeeping tips every small business owner should follow. Bookkeeping is the lifeblood of any business. It helps you track your progress, make informed decisions about where to allocate your resources, and monitor your performance over time. If you’re not keeping accurate and up-to-date records, you’re putting your business at a serious disadvantage.
Running a business is complicated enough without having to worry about losing track of vital information. Bookkeeping gives you a centralized place to store all your financial data so you can access it easily when you need it.
Here are the bookkeeping tips for small business owners:
Keep Business and Personal Expenses Separate
One of the most important bookkeeping tips for small business owners is to keep their business and personal expenses separate. Mixing your personal and business finances makes it difficult to track your spending, manage your cash flow, and prepare accurate financial statements. It can also create problems come tax time.
To avoid these issues, open a separate bank account for your business and make sure all your business-related expenses are paid from that account. Then, transfer any income you earn into your personal account. This will help you keep a clear record of where your money is going and make it easier to file your taxes.
Use Accounting Software
Another helpful bookkeeping tip is to use accounting software. This type of software makes it easy to track your income and expenses, generate financial reports, and manage your inventory.
There are many different accounting software programs available, so choose one that’s right for your business. For example, if you have a retail business, you’ll need a program that can track your inventory levels. If you’re a freelance writer, on the other hand, you might want a program that allows you to send invoices and track payments. Once you’ve selected a program, take some time to learn how to use it properly.
There are usually plenty of resources available online, such as tutorials and user guides.
Hire a Professional Accountant
One of the best bookkeeping tips for small business owners is to hire a professional accountant. An accountant can help you with all aspects of your bookkeeping, from setting up your chart of accounts to preparing your tax returns. They can also offer valuable advice on how to improve your financial management.
If you don’t have the time or knowledge to do your own bookkeeping, hiring an accountant is a smart solution. Choose someone who has experience working with small businesses and make sure they’re up-to-date on all the latest tax laws.
Outsource Your Bookkeeping
If you don’t want to hire an in-house accountant, another option is to outsource your bookkeeping to a third-party provider. This can be a cost-effective solution, especially if you don’t have a lot of transactions to track. When outsourcing your bookkeeping, be sure to choose a reputable and experienced provider. Get references from other businesses and compare pricing before making your decision.
Pay Yourself a Salary
One of the most important bookkeeping tips for small business owners is to pay themselves a salary. Many business owners make the mistake of taking all their profits as personal income. While this might seem like a good way to save on taxes, it can actually create problems come tax time.
It’s important to remember that your business is a separate entity from you personally. This means that your business income is subject to business taxes, not personal taxes. Paying yourself a salary ensures that you’re taking home money that’s already been taxed at the appropriate rate. It also makes it easier to track your expenses and prepare your financial statements.
Make Sure You’re Reimbursed for Business Expenses
If you have employees, be sure to reimburse them for any business-related expenses they incur. This includes things like travel costs, office supplies, and cell phone bills. If you don’t reimburse your employees for their business expenses, they may be less likely to incur them in the first place.
Plus, you could end up owing taxes on those expenses if the IRS audits your business. To avoid this, keep track of all the business-related expenses your employees incur and make sure they’re reimbursed promptly.
Keep Detailed Financial Records
As a small business owner, it’s important to keep detailed financial records. This includes everything from invoices and receipts to bank statements and tax returns. Detailed financial records will help you keep track of your income and expenses, which is essential for effective bookkeeping. They can also be helpful if you’re ever audited by the IRS.
So, make sure you have a system in place for tracking all your financial documents. You might want to invest in accounting software or hire an accountant to help you with this task.
Review Your Financial Statements Regularly
Another important bookkeeping tip is to review your financial statements regularly. This includes your income statement, balance sheet, and cash flow statement. Regularly reviewing your financial statements will help you spot any problems early on so you can take corrective action. It will also give you a better understanding of your business’s financial health.
So, make sure you’re reviewing your financial statements on a monthly or quarterly basis. And if you have any questions, be sure to ask your accountant for help.
Keep Your Receipts
Whenever you make a business purchase, be sure to keep the receipt. This includes everything from office supplies to marketing materials.
Keeping your receipts is important for two reasons. First, it will help you keep track of your expenses. Second, it will give you the documentation you need if you’re ever audited by the IRS.
So, make sure you’re keeping all your business receipts in a safe place. You might want to invest in a receipt scanner so you can digitize them for easy tracking.
If you provide goods or services on credit, be sure to invoice your customers right away. This will help you stay on top of your receivables and ensure that you’re paid timely. You can use accounting software to automate the invoicing process. This will save you time and make it easier to keep track of your invoices.
You might also want to consider offering a discount for early payments. This can encourage your customers to pay their invoices promptly.
Send Payment Reminders
If you’re having trouble getting paid, consider sending payment reminders. This can be a gentle way to nudge your customers to pay their invoices on time. You can automate the payment reminder process by setting up email or text message alerts. This will save you time and make it easier to stay on top of your receivables.
You might also want to consider using a collection agency to help you collect overdue payments. However, this should be a last resort since it can damage your relationship with your customers.
Assign Crucial Bookkeeping Tasks to Employees
If you have employees, assign crucial bookkeeping tasks to them. This will help you stay on top of your finances and free up your time to focus on other aspects of your business.
Some tasks you might want to assign to employees include invoicing, payments, and financial reporting. Just be sure to train them properly and give them the resources they need to succeed.
And if you’re not comfortable delegating bookkeeping tasks, consider hiring a part-time or full-time bookkeeper. This can take a lot of the burden off your shoulders and help ensure that your finances are in good hands.
The Bottom Line
There you have it. These are some essential bookkeeping tips to help you run your business more effectively. By following these tips, you can stay on top of your finances and avoid any common pitfalls.
If you want accurate bookkeeping for your business, consider hiring a reputable accounting firm. One of the trusted accounting firms in Florida is Swiftbooks, LLC. Call 786-204-2881 today to help your business keep its financial records straight!