4 Important Bookkeeping Tips for Small Business Owners
Did you know that 5.4 million new US business applications were filed in 2021? Proper small business bookkeeping will play an important role in deciding which of those businesses survive.
Bookkeeping for business owners helps avoid costly errors and keep track of cash flow. Using good bookkeeping advice can also help prepare for tax season and potential audits.
The following guide will explore 4 crucial business bookkeeping tips that every owner should observe.
1. Separate Personal and Business Finances
Get a credit/debit card to use for your business and keep personal transactions separate. This helps limit your total transactions at tax time which will save your bookkeeper time. Keeping personal expenses separate also helps to avoid committing tax fraud.
You could even lose out on beneficial tax deductions and credits if you miss documenting a business expense. Visit WealthAbility for more helpful tax planning strategies.
2. Prioritize Record Keeping
Record and organize every transaction to help keep your cash flow on track. Records should include things like invoices, receipts, and expenses. You’ll be able to predict future business opportunities and follow tax compliance in the event of an audit.
Today, it’s better to digitize any paper receipts, but keep paper receipts somewhere secure if you have them. Consider creating a backup of your records in case you lose anything.
Most cloud-based accounting software can hold and organize records for you. You can scan receipts using your phone or send electronic bills directly to your bookkeeping system.
3. Create Reports
Monitoring incoming and outgoing cash makes recurring financial check-ups simple. Use bookkeeping software to guarantee that all your clients pay their invoices on time to prevent gaps in your reports.
Closely observe your records at the end of each quarter in addition to your monthly reports. Look for trends such as falling or rising sales, big expenses, and clients that pay late.
Properly assessing your numbers will help you to prepare for an improved cash flow going forward.
4. Budget for Taxes
Many successful businesses put their excess cash back into the company after making a profit. Examples include product development, marketing, and other growth techniques. It can help maintain a company’s momentum into the future.
Although, it’s important not to rush in and budget your cash wisely. Keep in mind that a piece of your income goes towards tax expenses each year.
Consider saving about 20{db9acdd2b5204ea72ac6ab2312f7630b6e282665344bcd151a43454148e44b67} of your total income for tax purposes It will ensure that you have plenty of money remaining to pay your annual bills. Set up a separate savings account if you have a hard time keeping extra money in your main business account.
Following Bookkeeping Tips
Now you know 4 must-follow bookkeeping tips to help keep your business running smoothly. A successful business prioritizes organization, detailed record-keeping, and careful budgeting for the future.
Remember this guide to stay prepared and keep control of your business finances year after year. Check out the rest of our blog for more helpful business and financing advice.
