The Essentials of Bookkeeping
Some small business owners love going over their own books — after all, it’s their personal scorecard of how well the business is doing. Others dread dealing with numbers or get so caught up in day-to-day operations that they neglect their bookkeeping. Whether you love it or hate it, good bookkeeping is essential to small business success.
Separate Your Personal and Business Finances
When your business is just starting out, it is easy to mix and mingle expenses and income. Co-mingling business and personal money can lead to big tax headaches down the road. Open a business bank account as soon as you have formed your business entity. It is also a good idea to get a business credit card as soon as possible. Using a business credit card responsibly helps your business build its credit rating separate from your personal credit rating.
Do A Weekly Checkup
If you are not a numbers person, your natural tendency may be to put off the "boring" part of entrepreneurship as long as you can. Then, you could end up with books that are not balanced, bounced checks or unpaid invoices that are months overdue. Make sure to review your books at least once a week. It will help ensure everything is in great shape.
Get Professional Help With Your Bookkeeping
If you are the business owner also doubling as the office administrator/bookkeeper and finding the bookkeeping too hard or don't have enough time to do it, then we recommend hiring a professional. Hiring a professional is cost-effective and more importantly, it will save you time to focus on growing your business.
Track and Document Business Expenses
With changes to business tax reporting for 2019, you should consult your accountant to see what kinds of expenses you will be able to deduct next year. Be sure to keep detailed records, including receipts. Avoid having drawers stuffed full of receipts by scanning and digitizing them; there are several smartphone apps that make this easy. Avoid using cash for business expenses. Using your business credit card is a good way to simplify your expense tracking, because most business credit cards sort your expenses by categories.
Stay on Top of Your Business’ Accounts Receivable
Late-paying customers can quickly dry up your business’ cash flow. That’s why it is essential to pay attention to when your receivables are due and act immediately when they are overdue. Reach out to late-paying customers right away to see what’s going on with their payment and when you can expect to receive the money. If the customer is having financial difficulties, see if you can work out a payment plan to start getting some of the money that is owed to you.
Automate Whenever Possible
Bookkeeping software simplifies the tedious process of entering data into spreadsheets and reconciling figures manually. Cloud-based bookkeeping software are even better because they back up all your data — no more worries about a crashed hard drive wiping out your books. This is why we use QuickBooks Online and EpicLedger. Both are cloud-based softwares that eliminate the possibility of losing important data. Everything is in the cloud.
Stay On Top Of Tax Deadlines
In order to avoid getting caught short, plan ahead. Set aside money for any anticipated tax bills and pay them on time so you don’t face penalties. The IRS website’s tax calendar for businesses can sync with your own cloud-based calendar so you never miss a deadline.
Avoid Using Cash For Business Expenses
Instead, use your debit or credit card religiously. When you use cash, you lose track of potential write-offs. If you must pull money out of the ATM, write a note on the receipt stating the purpose of the withdrawal.
Learn To Understand Monthly Bookkeeping Reports
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 low cash flow and huge debts. To avoid this, you must understand your bookkeeping reports such as, income statements, balance sheets, cash flow statements, etc. With OneSelfClub you get a monthly financial meeting with an advisor to review these reports and your financials in detail. This is a crucial step to have someone consult with you about your financials as they can help you understand the trend of how your business is doing, and provide another point of view on your financials. Additionally, you can use this time to go over additional questions or concerns you may have on a monthly basis instead of having to clean up everything year end to file your taxes.
Perform Quarterly Reviews
Each quarter, take an in-depth look at your bookkeeping and accounting records. Look for trends, such as growing or declining sales, year-over-year revenues, or an increase in late-paying customers. Consult your accountant so that they can help you look at the big picture so you’re better prepared for future capital needs such as buying new equipment or moving to a bigger location. Additionally, you can use financial dashboards to perform quick yet thorough reviews.
Plan For Major Expenses
Set aside money for major expenses like furniture, new equipment, repairs, etc. Proper bookkeeping is important and it can help you budget for your business. By budgeting for your small business in the coming years, you can save a lot of worry about dealing with these expenses in the future.
Have Immediate Access To Your Financial Data
If you don't have access to your financial data, it becomes exponentially difficult to make business decisions or analyze the health of your business when you need to most. Think about driving your car at night without headlights - you are bound to crash. No matter where you are in your business’ journey, immediate access to critical information like cash flow, revenue, net profit margin, expenses, etc. will allow you to make smarter choices. EpicLedger is a great tool that allows business owners to easily access their financial data no matter the time or location.