8 Tips for Successful Bookkeeping for Small Business Owners

It should not be surprising that 40% of small business owners find the accounting side of their job the biggest hassle. That is because you probably did not start a business to be your own accountant. 

Fortunately, there are many options to help you make bookkeeping easier, from software programs to professionals for hire. 

However, let’s start by reading these 8 bookkeeping for small business tips. 

1. Keep Personal and Business Spending Separate

Your first priority in business bookkeeping is to keep your personal and business expenses separate. This can be difficult at first because your business is most likely blended into your day-to-day life. 

Start by having a business account with your bank and its own debit card. 

You also want to keep a clear boundary between co-workers, especially if they are friends or family members. Professional time and leisure time should be clearly defined, especially when you spend your personal time with each other. Be clear about when you and your employees are on the clock and not. 

2. Save All Documents

Having a proper filing system will make your bookkeeping for business run smoothly. You want to keep all documents related to your business safely stored and easy to find. Some of these documents might include:

  • Receipts
  • Invoices
  • Bills
  • Credit Card Statements
  • Copies of Checks
  • Bank Statements
  • Tax Forms
  • Payroll Records
  • Deposit Slips

Save anything that has your business name on it even if you have a digital record or if the transaction was voided. 

3. Stay on Top of Pending Payments

Your cash flow is what keeps your business running so make sure it is not backed up. If you have pending statements waiting for payments from customers then you may not be able to pay bills or employees and invest money back into your company. 

This is why small business bookkeeping also includes keeping up with pending payments. However, this process is dependent on your type of business and the products or services it provides. In many cases, customers pay upfront, but you may be a business that sends bills for your services. 

4. Have an Emergency Fund

No matter how balanced your budget there is always a chance that an unexpected expense may occur. Do not be part of the 20% of small businesses that are in debt over $100k because of unpreparedness. 

You can avoid taking out loans and using credit by always paying in cash and by having an emergency fund. First of all, never spend what you do not have. Second of all, have a backup account that you add to monthly for any sudden expenses. 

When you run your business without having to worry about paying off debt then you make profits rather than paying interest. 

5. Choose an Accounting Method

How you track your small business expenses and payments will determine how your bookkeeping functions. There are two accounting methods that you can use. 

The cash method uses real-time to record both your profits and expenses. You only record both once the cash is in your hand or the bill is paid. This makes it easy to see your profits without juggling pending transactions. 

An accrual accounting method is used when your business has a large inventory or manufactures products. This is more complex because the business expense and profit tracking are more complex. 

However, this type of bookkeeping is necessary for businesses that have cycles of payments rather than immediate ones. It allows you to record payments when the order is placed rather than when the cash is received. This also applies to expenses. When something is bought like inventory it is recorded that day rather than when the bill is officially paid. 

6. Prepare all Year for Taxes

Tax time can be one of the most stressful periods for a small business. However, you can diminish the time it takes to prepare your taxes last minute by thinking about them all year. 

This may not sound pleasant either, but a little time each day ensuring your paperwork is completed and filed will be worth it.

Remember that there are three possible tax forms that you need to file as a business: income, payroll, and sales. 

Your income is the profit made from your business as a sole proprietor or as an LLC. A sole proprietor means that your business is part of your personal income. This is different than if your business is registered as an LLC, which will be paid as self-employment.

The payroll part of your taxes is used only if you have other employees. Report this type of tax semiweekly or monthly on your employees’ paychecks. 

Lastly, a sales tax is the tax collected when you sell your products to customers. This type of tax can be the most difficult to track if you have multiple outlets for selling your merchandise. 

7. Use Essential Tracking Documents

There are three types of tracking sheets that help you with bookkeeping. You can use a software program with these documents to help you enter your business’ data, which reveals the value of your business. 

Use a balance sheet to measure the equity vs. the liability of your company. It does this by comparing what you owe to what you own and finding the difference. 

Find out your revenue by using a profit and loss statement. This will show you, over time, if you will be making money or losing it based on your business model. 

If you are losing money then a cash flow report is the last document you will find useful. This will track where all your money is going. Your cash flow goes into three different categories: your operating costs, your investing decisions, or your financing (debt payments.)

8. Hire a Professional to Help

The last tip and maybe the most helpful when you feel overwhelmed is to use bookkeeping services. A professional accountant or bookkeeper helps you get organized even if it is temporary assistance. 

You can later decide to hire a full-time employee to keep your business’ records straight. 

Getting Started with Bookkeeping for Small Business

These bookkeeping for small business tips can help you understand what it takes to make a profit through good record keeping. However, getting professional help from the start will save you time, which allows you to focus on your business growth. 

No matter how much help you need we are here to offer guidance. Schedule a free consultation with us today!