Let’s face it, when it comes to business finances, there are two types of small business owners. Those who love to go over their books constantly with a fine-tooth comb. And, those who dread account closing like the arrival of the in-laws.
Regardless of how you feel about bookkeeping, it is an essential and very important part of any business, large or small. But that doesn’t mean that it has to be rocket science.
Keep reading to learn about 5 essential tips for small business bookkeeping to help keep it simple, easy, and legal.
Separate Your Personal and Business Finances
This may seem like a pretty obvious statement, but it still needs to be mentioned. It’s that important.
Aside from making things easier to understand where your business’s money is coming and going from, it is necessary for tax reasons.
Your business and personal finances need to be separate because they are taxed differently. Your business revenue is not subject to the same tax laws that your personal income is. And you don’t want your personal income taxed the same as a business.
Whenever and wherever possible automate your accounting and bookkeeping. Accounting automation software can streamline the bookkeeping process allowing for easy and simple tracking with accuracy.
These automated programs allow for custom templates and calculations, allowing you to plug in the numbers and let the software do the manual labor.
Cloud-based accounting software is even better than that. It allows access to your files and books from anywhere. And, it provides easy scalability for your company.
Monthly Account Closings
This is also known as balancing the books. Every month the small business owner should conduct an account closing. This means they sit down with their financial records for the past month and make sure they are accurate and true.
Setting aside a routine time every month to balance your books will help to ensure you stay on top of them. Letting your books go too long without being reviewed can lead to over expenditures, bills that aren’t paid, and invoices not collected on.
A routine schedule to review your books will help make sure everything is in order. This includes balancing your books in your accounting automation software.
Plan Ahead for Taxes
Get to know as much as you can about your tax situation and whether or not you will likely need to pay at the end of the year. If you can even, try to estimate how much you might owe.
Once you know this begin to play ahead for it. Develop a way to meet all your deadlines for paperwork and applications, as well as your own deadlines for setting money aside.
Having your bookkeeping in order and as accurate as possible will help you to plan ahead for when taxes are done. Likewise, planning ahead for taxes due will help to keep your books accurate and true.
Outsource When Necessary
The final tip to help you have the most accurate and true books possible is to outsource when you need to. Even if you need someone to double-check your own work.
Professionals will be able to find mistakes you may have missed, as well as be able to handle tasks you might not have time or a desire to perform. While this may seem counterproductive to being a small business, sometimes spending a little money elsewhere for the peace of mind of professional quality is worth it.
Small Business Bookkeeping and Accounting
When it comes to bookkeeping for small businesses it is important to remember it’s not as complicated as it first appears. Small business owners are not required to be accountants in order to run their business.
Instead, simple bookkeeping techniques will be sufficient enough to keep track of your revenue, expenses, payroll, and inventory. Accurate and efficient bookkeeping is not only the cornerstone to determining the success or failure of a business; it also helps to ensure the business isn’t losing money or breaking any laws.
It’s important, however, to admit your own limitations and to know when it is necessary to outsource. Should you find yourself in over your head, or perhaps just want a second set of eyes more skilled than your own, call a professional.
Professionals can consult with you on your bookkeeping pointing out any issues you wouldn’t have seen, as well as taking care of your bookkeeping for you. Freeing you up to focus on other aspects of your business more suited to your skills and talents.