Bookkeeping is either an exciting numbers game or the chore of all chores. Regardless how you feel about tracking income and expenses, however, good bookkeeping is the cornerstone of a solid business. Handling so much information can be a challenge, even if you enjoy it, and many small business owners have no choice but to handle their finances themselves.. For many, maintaining good records is as daunting as the initial launching of the business. Bookkeeping can be one of the most challenging aspects of running your own business, and while hiring professional bookkeeping services is the ideal solution, there are ways to make your work easier, with or without a professional.
We’ve put together a few tips to help you manage your business accounts with a little less stress. You might even save a few dollars.
A Saved Receipt is Money in the Bank
This is really a two-part point, and both parts have to do with saving money. Many small business owners lose money personally by spending money out of their own pocket or using their personal credit to buy materials for their company. This isn’t necessarily a bad a practice, but remember to submit all receipts for business expenses paid out of pocket. If you throw out that receipt or forget to turn it in, you’ve just lost money out of your own pocket, and neither you nor your business will be able to deduct the expenses you shouldered come tax time.
The second point is even simpler than the first: never throw out receipts. It doesn’t matter how small a purchase may seem. All those little purchases can add up to big savings at tax time, which is money back in the company’s pocket.
Double Entry Bookkeeping
Double entry bookkeeping is a style of accounting invented by a Franciscan monk from the same era as Leonardo da Vinci. It has survived the centuries as the primary method of bookkeeping for a reason. If you aren’t already using double entry bookkeeping, don’t worry; it isn’t very complicated. Following this method is easy. Every transaction, that means any time money comes in or goes out, gets recorded as both a credit and a debit. The money comes from somewhere, and then it goes somewhere. For instance, if you are paying for fabric, you mark the transaction as a credit expense from the bank and a debit to the merchant from whom you bought the fabric. This extra step helps trace finances more easily and is invaluable when tax season rolls around.
Reconcile Your Ledgers with Your Bank Statements
Comparing the numbers in your ledger to the numbers in your bank statement is an essential defense against human error. It’s entirely possible that you or the bank has made a mistake somewhere along the line, and it’s important for you and your bank to know just how much is in your account. It’s the same principle as matching the numbers in your check book to a personal bank account statement. This is a monthly routine that saves multiple headaches down the road.
Make an Expenses Schedule
Everyone has bills. It doesn’t matter if you are the boss of yourself, or if you oversee the labor of several employees. Rent, utilities, internet fees, phone bills, payroll, and subscriptions to business services all come knocking at the same scheduled times every month. Keeping a physical or digital schedule to keep track of when each bill is due can help you avoid late fees and handle the flow in and out of your business account more effectively. If you buy certain materials for products on a regular basis, you could include such payments on the schedule as well. This gives a more accurate picture of regular expenses. Keeping the schedule in a frequently viewed location will help you memorize the core costs of your business.
Save for Taxes
Although keeping track of your deductions and storing receipts will help take the edge off your taxes, you will still owe money to the state. Taxes cost your business money, and it’s a wise idea to treat them as an annual expense. Although it will become easier to estimate how much you will owe over the years, it’s especially important to build a tax nest egg during your first year in business. Many small businesses have to take out loans to pay their taxes, and this option is always more costly than saving for expenses in advance. Think of saving for taxes in the same way you would save for upgrades or investments. Remember, even if you hire a professional to provide tax services, he or she can only work with what you have ready.
Bookkeeping might not be easy, but using these tips will make it a little simpler. Remember, working through the minutiae of your business finances is a great way to keep yourself apprised of health of your business. Bookkeeping is something like a constant check-up, and the better you know what ails the patient, the more quickly you can make improvements.