Unless you are an accountant or a fan of working with numbers, bookkeeping is probably not your favorite task. But adopting some good habits early can help you avoid costly errors when it comes to record-keeping. The IRS tells us 40 percent of small businesses incur an average penalty of $845 each year for late or inaccurate filings and payments. Whether you go at it alone or use outsourced bookkeeping services, it is crucial to your small business.
Bookkeeping is not only a way to achieve and maintain compliance with U.S. tax laws, but it’s also essential to good business practices, i.e. ensuring a good ROI. Learn how to do small business bookkeeping properly and you’ll see where your money is going and ensure that you don’t miss out on deductions that can save you thousands of dollars.
1. Plan for Major Expenses.
Be honest about the expenses that could be coming up in the next one to five years. Is it likely that you will need to upgrade your facilities? Is your office equipment on its last legs? It is important to acknowledge the seasonal ups and downs of your business, and how they will affect your ability to spend during those times.
By making sure that you have forecasted for major upgrades or peaks in staffing costs, you will avoid taking money out of the company in good months and finding yourself short in slow months.
2. Separate Receivable Payments From Borrowed Loans
One of the causes of business failure is poor management of funds. Mixing of funds deposited by clients together with the funds that the business has borrowed might lead to confusion and later degenerate into a financial crisis.
It is therefore advisable to have software that has the ability to keep records of both income and borrowed funds separately for easy and quick follow-ups whenever needed. This will help you keep track of what is yours and what the business is owed.
3. Track Your Cask Flow
Often businesses work hard at building a brand with a passion yet they fail to track cash flow. It is critical for a business to track its spending no matter its size and it is only possible with accurate financial records. Several growing, and seemingly, profitable businesses have failed because they were suddenly hit by a cash-flow crisis and they weren’t prepared. Hiring an outsourced bookkeeping service can ensure your cash flow is on the right track to creating success for your business.
4. Track Your Expenses.
Expenses can be hard to track, which means that you may be missing tax write-offs that you could have benefited from. Business credit cards can be handy tools to make sure all expenses are kept together and tracked. As long as you keep up to date with your payments that is. Most providers have now adopted the service of categorizing your bill into types of expenses, meaning one less task for you to do.
To help prepare for audits, it is also useful for you to make notes in your calendar of the clients that you are meeting for each of those coffee dates, lunches and events. This will help substantiate your expenses for your tax records, should you be audited. That goes for car mileage too. When driving long distances to meetings, make sure you either keep track of your mileage or do a calculation with Google Maps to log how far you traveled and the associated costs.
5. Set Aside Money for Taxes.
You know that you’re going to have to pay taxes and you know when. So systematically put money aside for it. Unpaid taxes can incur penalties and interest from the CRA, so make sure the money is there when you need it. By putting money aside each month, or each time a contract is paid, it will come as less of a sting when they are due.
6. Allocate Time on a Weekly Basis for Reviewing Your Books
According to many successful entrepreneurs, reviewing your books on a weekly basis will keep you updated about the state of your business. By doing so, you will be able to manage your cash flow, get to know your weekly expenses as well as be well informed about current invoices.
The above also allows you to monitor and evaluate weekly income and expenses incurred by the business. You will be able to track down and analyze any issues that may arise. Another way to track all the expenses and income generated by the business is to have a business credit card since it keeps a record of all the expenses. Furthermore, it refrains you from using cash and thus losing receipts will be a thing of the past.
7. Obtain Simple Accounting Software That Meets All Your Business Needs
This is among the most vital bookkeeping tips for small business owners. This is because it gives you a chance to access your financial status anytime. Most of these accounting software programs are easy to use or rather easy to learn. They are also very good at multi-tasking with the ability to work out all your expenses as well as income of the business.
8. Hire an Outsourced Bookkeeping Service Provider
A professional small-business accountant most likely knows more than you do and can help keep you compliant and take advantage of deductions. Most importantly, hiring outsourced bookkeeping services lets you devote your time and energy to the aspects of your business you really love.
The bottom line of your small business bookkeeping
Be aware of proper bookkeeping techniques as well as common pitfalls so that you can avoid losing precious time and money. A fully-automated accounting solution offers the most benefits, but regardless of which bookkeeping solution you choose, when it comes to compliance working with any type of professional outsourced bookkeeping solution is better than stuffing your receipts in a shoebox.
Limitless Investment and Capital Outsourced Bookkeeping Services in Denver
Since 2013, Limitless Investment and Capital have been helping small businesses and start-up companies stay in business by offering affordable, high-quality bookkeeping services in Denver, Colorado. It is one of our goals to provide you with exceptional services. We are known for the superior quality of our work and customer service. We are also highly experienced with using QuickBooks and other accounting software. Contact us today to schedule a free consultation.