8 Bookkeeping Tips to Simplify Small Business Financials Bench Accounting

small business bookkeeping tips

List the expenses along with the date, vendor, and purpose on a spreadsheet and attach the receipts. While this is a bit of a hassle, it’ll guarantee that your bookkeeper deducts the expenses since they were paid with a check from the business account. Eversmann maintains that a business is ready for a bookkeeper when there’s enough accounting to reconcile to make you hate the process. She suggests tracking the time it takes to evaluate your books every month to see what your tolerance is. Additionally, opening business accounts will allow you to build and develop business credit, which is similar to but separate from your personal credit history and score. Your business credit score can get you lower rates on your insurance policies and increase your borrowing potential.

small business bookkeeping tips

Straightforward accounting software allows you to view your income statement and balance sheet at the click of a button. Record and categorize your documents every week during your weekly bookkeeping session. Quick, regular audits of your documentation and transactions will ensure that you’ll never have a stressful night’s sleep—at least as far as your books are concerned.

This should typically take an hour or two and will simplify your life come tax season. 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. When your business income mixes with your personal accounts, it doesn’t make more money—it just makes a mess.

Budget for major expenses and set financial goals

When businesses use bank financing to fund their daily operations, they often struggle to pay back the high-interest debt. Before taking on any external funding, it’s important to perform adequate due diligence. You want to use a simple, effective process that allows you to track and record all finances related to your business quickly and easily. This way, all your expenses, invoices, deposits, and other financial information will be neatly stored and accounted for once tax season arrives in the spring. Cash may be king, but it needs a bit of extra attention when it comes to DIY bookkeeping.

  • When it comes to your books, keep a thorough record of all your expenses, such as supplies, inventory, insurance, and utilities.
  • You can use your streamlined online system to note how much cash is exchanged and why.
  • When setting your financial goals, consider three distinct elements — the past, present, and future.
  • DIY bookkeeping is simplest when you break it into manageable chunks—don’t try to do it all at once.

You don’t ever want to lose track of your cash, and unlike checks or online payments, cash doesn’t come with handy documentation. Thankfully, once you have a simple system in place, documenting your cash flow is easy. Be sure to compare your actual results to your forecasted cash flows. It might be difficult to make good predictions at first, but after a few times through the cycle, you’ll see dramatic improvements. Once you’re able to make accurate projections of expenses, you can quickly identify and resolve problems. Without a budget, many business owners don’t recognize a problem until they have a cash flow crisis.

Stay on top of tax deadlines.

The failure rate of sole proprietorships is even lower, according to the same study. Your business can deduct a standard rate per mile―65.5 cents for 2023―for any business mileage that you drive using your personal vehicle. Track the date, miles, and purpose of each business trip, and submit it for reimbursement with your monthly expenses as explained in tip three above. Owners of C corporations (C-corps) and S corporations (S-corps) must pay themselves a reasonable salary and run it through the payroll system like any other employee. However, I suggest that self-employed owners, freelancers, and partners also pay themselves a “salary,” although it’ll technically be an owner’s draw and excluded from payroll. Similarly, an accurate representation of your current bookkeeping will allow you to forecast realistic financial goals for your business to hit over the next quarter or year.

  • Once you’re able to make accurate projections of expenses, you can quickly identify and resolve problems.
  • The better the program is tailored to your business, the easier and more beneficial it’ll be to use.
  • Many of these bookkeeping tasks are an integral part of your business and hard to outsource, like issuing invoices and paying bills.
  • Best of all, it doesn’t feel like work when it’s part of your small business bookkeeping routine.
  • 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.

It is essential to keep your personal finances separate from your business. Comingling accounts and expenses – even by accident, like using the wrong credit card – makes more work for you or your accountant to organize and can send up red flags to auditors. When you sign-up with Bench, you’ll get an easy-to-use platform and direct access to your in-house small business bookkeeping team. The return on investment with a dedicated bookkeeper may surprise you. Plus, when tax season rolls around, you can take comfort in knowing your financials are 100% correct and ready to be handed off to your accountant.

Contact S.H. Block for Help With All Your Company’s Financial Needs

Tim worked as a tax professional for BKD, LLP before returning to school and receiving his Ph.D. from Penn State. He then taught tax and accounting to undergraduate and graduate students as an assistant professor at both the University of Nebraska-Omaha and Mississippi State University. Tim is a Certified QuickBooks Time (formerly TSheets) Pro, QuickBooks ProAdvisor for both the Online and Desktop products, as well as a CPA with 25 years of experience. He most recently spent two years as the accountant at a commercial roofing company utilizing QuickBooks Desktop to compile financials, job cost, and run payroll.

By eliminating all personal transactions from your business accounts, you’ll greatly reduce the number of transactions your bookkeeper must categorize and reconcile. When customers don’t pay on time, your business’s cash flow can dry up fast. Pay attention to when your receivables are due and contact late-paying customers right away to nudge them along. Even if a customer is having financial problems, you may be able to set up a payment plan to get at least some of what you’re owed.

Invest in accounting software

But it doesn’t have to be difficult or painful, especially if you build healthy habits into your routine from the get-go. We believe everyone should be able to make financial decisions with confidence. Small business bookkeeping is a necessary business task, but if it’s not your favorite activity, you’re not alone. Admiring your profits is always fun, but going over ledgers and calculators?

But if you fail to focus on your accounting tasks, your business can quickly sink before it has the chance to grow. One of the most common signs of an insolvent business is an inability to make payments on time. The business may struggle with a lack of funding, poor credit score, or difficulty fulfilling its working capital needs.

Co-mingling expenses might not seem like a bad idea at first, but it can quickly cause huge headaches for your small company. As a direct fallout of COVID-19, more than 54% of businesses are struggling with delayed invoice payouts. When setting your financial goals, consider three distinct elements — the past, present, and future. Going full steam ahead without a financial forecast is a waste of time and money. Deciding which accounting structure to use for your small business is not your accountant’s prerogative alone. Remember that every dollar spent takes the company one step away from profit.

The good news is that if you oversee your own business financials, you have control over how much money you are saving for tax season. These platforms have built-in templates that allow you to easily input and track basic items, such as invoices, deposits, and check printing. By keeping your files digital, not only do you save a few trees, you also reduce the risk of physical copies being ruined by flood or fire. Here are ten great bookkeeping tips to get you started on the path to bookkeeping bliss for your small business.

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