Bookkeeping is the record-keeping part of accounting. It is a process that involves recording all the transactions and financial activities of your business. It goes without saying that small businesses should keep careful track of cash flow. If they don’t keep track of current cash flow, even if they’re profitable, they can fail if they lack enough cash on-hand to maintain current business operations. In the same way, not tracking future cash flow can lead to similar unhappy outcomes in the future.
While hiring a bookkeeping service is more affordable than you might think (and totally worth it since it saves you time and keeps your financials accurate), many small businesses and self-employed individuals opt to handle their own bookkeeping in order to cut costs. If that describes you, developing a basic accounting system that combines invoices, tax information, expenses, and deposit records will make your life much easier.
With that in mind, here are five tips for better small-business bookkeeping, so you can spend less time on paperwork and number-crunching and more time growing your business
1. Separate your personal and business finances.
Rule #1 of business finances is never mix business with pleasure. Having two types of financial activity operating out of the same cash pool is a recipe for complication. Stay organized by separating your accounts. Trust us: your tax preparer will thank you.
2. Go paperless by using cloud-based accounting and online bookkeeping.
Consider using software that offers the basic functions required for any business bookkeeping. Many packages are specifically designed for small businesses and include basic templates for things like deposit slips, invoices, and business account checks printing. Cloud-based systems enable business owners to access business information from anywhere through online bookkeeping.
If you’re looking for the ultimate bang for your buck, there’s a reason QuickBooks® Online is the number-one financial software on the planet. And, if you sign up through us, you can get an exclusive discount of 40% off a QBO subscription.
3. Set aside money for taxes.
To be well-prepared for tax time, you’ll want to do more than keep good records. Set aside some money each month for taxes to avoid getting tangled up in things like having to take out a loan to pay taxes, or having a cutback at the end of the year. How much you’ll need to save is going to depend on a number of factors, but Freshbooks recommends 30% to 40%.
4. Find a good adviser.
Having an expert to assist you at least once a month will pay huge dividends. Having an adviser on hand to answer questions, correct mistakes, and train you on the tools, tips, and tricks of the bookkeeping trade is invaluable for the ‘weekend warrior’ accountant. And it doesn’t have to be expensive! Our Accounting Support services, for example, start at just $175 per session.
5. Have an emergency fund.
Having an emergency fund is a must for every business. Make sure to set aside money to take care of emergency expenses like repairs, inventory restocking, or unexpected maintenance or supplies. Knowing you have cash on hand in case of a pinch will save you a lot of worry about in future.