As a small business owner, your to-do list might seem never-ending, and bookkeeping might not be your highest priority. While staying on top of your small business finances is crucial to running a successful business, we realize it’s certainly not the most fun part of the job. That is why we’ve decided to share our top 8 bookkeeping tips, and help you get your business set up for success!
8 Bookkeeping Tips
1. Create a monthly budget for your business
You’ve heard the term, give every dollar a job? Creating a monthly budget has many benefits. You know exactly where your money is going. You know how much you will spend. And you can develop other financial goals for the month, such as sales targets, based on your baseline numbers. But the most important aspect of this isn’t just paying your bills every month- it’s having an active plan to reinvest your profits. This is an easy way to ensure your businesses will continue to grow.
2. Embrace the paper-less lifestyle
Keeping track of expenses is a huge job, but saving physical receipts is extremely impractical- especially when they start fading and become unreadable. Embrace a paper-less lifestyle by making a habit of photographing or scanning your receipts every week to create digital copies and toss the physical ones. Don’t forget to back everything up on a hard drive and cloud based storage system so you never have to worry about losing them.
3. Invest in proper accounting software
The sooner you start using proper accounting software, like quickbooks, to manage your small business finances, the better your finances will be in the long run. The benefit of using a professional bookkeeping software for your small business finances is that your records will be organized and standardized from the start. This will come in handy anytime you need to run reports, show records for taxes or loan applications, and in general, will ensure that your finances are running smoothly.
4. Set a schedule for reviewing your finances regularly
Whether it’s weekly, or monthly, scheduling time to review your finances is essential to a business. A financial review at the beginning of the month will help you set goals and decide what your priorities are for your business in the coming weeks- whether it’s scheduling repairs, updating displays, or marketing new products. An end of the month review will help you see whether you hit your sales targets, have any outstanding invoices, and can help you adjust next month’s budget and goals.
5. Avoid using cash when possible
Whenever you’re buying something for your small business- avoid using cash. Cash spending is easy to lose track of, especially when you’ve got a million things coming on. We recommend getting a designated credit card for your business- that way your expenditures can be kept track of via your bank’s transaction history. Especially when it comes to tax write offs, having a digital ledger of your spending will help you know exactly what you spent your money on. An added bonus is that a good payment history will also help you build your business’s credit, which can help if you need a small business loan in the future.
6. Make sure you’re setting aside money for taxes
A good rule of thumb is to set about 30% of your gross income in a separate bank account for taxes. This can cover sales tax, social security or employee taxes, and self employment taxes depending on whether you’re a sole proprietor or LLC. The laws and regulations for tax obligations vary from state to state, so if you’re unsure of what exactly you are responsible for, we recommend seeking the advice of a CPA or tax advisor.
7. Stay on top of what you owe, and who owes you
We’ve said it before and we’ll say it again: don’t leave money laying on the table! Run through your accounts receivable at the end of every month and make sure no one owes you any money. Settle any outstanding balances with vendors and partners on your end as well. This preserves your relationship with vendors and benefits both your credit and business reputation.
8. If you’re pressed for time… delegate!
As a small business owner, sometimes the best thing you can do is learn to recognize your own limitations and hire someone else to help. If you don’t have time or energy to manage the day to day of your small business finances, but recognize the value of doing this for your business’s success, we recommend hiring a bookkeeper like the professionals here at KGC Consulting.
It may seem tedious or daunting at first, but once you’ve established a system for managing your small business’s finances, it won’t be long until it becomes second nature to you, and you will be well on the way to success.
Want to learn more about small business finance?
Check out more articles about bookkeeping for small businesses here, or schedule a consultation with a professional bookkeeper today.