Bookkeeping is the backbone of financial success when it comes to your small business. It’s the systematic recording, organizing, and managing of financial transactions. These processes are essential for understanding your business’s financial health. When you understand that, you make better decisions down the line. So today, I’m giving you five crucial tips that help small business owners streamline their bookkeeping processes. All so you can achieve financial clarity and pave the way for long-term growth.
Tip 1: Separate Personal and Business Finances
Mixing personal and business finances is a sure-fire way to end up confused, and at worst, penalized and fined. When you blur the lines between personal and business finances, you make it challenging on yourself to track expenses, assess profitability, and file taxes accurately. (So calm down there, Robin Thicke). Luckily, it’s easy to separate your accounts so you can track what money goes where.
Start by opening a separate bank account solely for business transactions. This simple step establishes clear boundaries and simplifies financial tracking. Similarly, using dedicated business credit cards helps segregate expenses. This makes it easier to monitor spending and identify tax-deductible items.
Tip 2: Choose the Right Accounting Software
Investing in the right accounting software can completely transform your small business bookkeeping process. It automates tedious tasks, provides real-time insights, and reduces the risk of errors.
What to Consider When Choosing Accounting Software
-
- Features Needed: Consider your business’s specific needs, such as invoicing, inventory tracking, or payroll management. Figure out what it is you can live without and what you absolutely need to make your business run.
-
- Budget Constraints: Decide how much you can spend, keeping in mind which features you put down as a “got to have”. Choose a software that fits into your budget while providing those features.
-
- User-Friendliness: Opt for intuitive software with a user-friendly interface. When you’re choosing the DIY route to small business bookkeeping, you should make sure you’re able to manage the software on your own. Most softwares offer a free trial so you can try it out before you commit.
As a QuickBooks ProAdvisor, I work exclusively with QuickBooks Online: the industry standard for cloud-based bookkeeping software. If you’re currently using a different accounting software, ask about making the switch! The process can be simple with the help of our team to support you.
Tip 3: Keep Detailed Records
Detailed records serve as a financial roadmap. This roadmap offers insights into your business’s past performance and guides future decisions.
What Records Should You Keep Up With?
-
- Income and Expenses: Document all sources of income and track every business-related expense. Make sure you’re being accurate so you don’t cause yourself problems later on.
-
- Invoices and Receipts: Keep records of invoices issued and received. Be sure to include supporting receipts for expenses incurred.
-
- Bank Statements and Tax Documents: Maintain organized records of bank statements, tax filings, and relevant financial documents. You’ll need these to ensure compliance when tax time rolls around.
Tip 4: Regularly Reconcile Accounts
Account reconciliation involves comparing financial records with external sources (like bank statements) to detect discrepancies and errors.
Regular reconciliation helps uncover inaccuracies early. Doesn’t it sound nice to prevent potential financial headaches down the line? Businesses run better when you can trust the integrity of your financial reports. Plus, you’ll be able to make sound decisions and foster confidence among stakeholders.
Tip 5: Seek Professional Help When Needed
While DIY-ing your small business’s bookkeeping is feasible for some, seeking professional help can provide expert guidance and peace of mind. It also gives you the freedom to focus on the parts of your business you actually excel at. Not everyone’s a math whiz, and that’s okay.
When should you seek help from a bookkeeper?
-
- You find you’re unable to stay on top of regular reconciliations
-
- You’re having trouble keeping transactions recorded in the proper categories
-
- You’re getting fined and penalized from the IRS
-
- You’re wasting precious time trying to understand small business bookkeeping.
If any of those sound like you, head over to our services and see how we can help you today. Whether you’re just starting out and overwhelmed, or you’ve fallen behind and can’t catch-up, let us handle the numbers from here.
