Bookkeeping Tips for Small Business Owners

Many business checking accounts and credit cards offer sign-up bonuses for opening new accounts that meet certain requirements. The value of these bonuses can exceed $1,000 in some cases, and some rewards can even be used toward personal travel. Additionally, opening business accounts will allow you to build and develop business credit, which is similar to but separate from your personal credit history and score. Your business credit score can get you lower rates on your insurance policies and increase your borrowing potential.

When you pay yourself a consistent salary, you legitimize your company in the eyes of the law and preserve all of your corporate protections. That means if someone sues your company, they can’t go after your personal assets, which is huge for limiting your risk. Paying yourself also gives you a real look at your business model. Or does it only appear that way because you haven’t been taking a salary yet? So, you want to make sure that you pay yourself, get a real sense of where your company stands, and make sure you’re creating a business model that’s built to last. If you don’t carry a receipt book with you everywhere you go, you can always rely on technology.

Best Small Business Accounting Software in 2023

For small business owners, the lines between personal and business finances can blur. Many new business owners use their own money to fund their entrepreneurial pursuits. Although it’s easy to mix things together, it is important to keep personal finances separate from your business record keeping.

Keep track of your cash using cloud software that links through multiple devices, like your phone or laptop. This way, your cash-tracking document or app is always readily accessible. You can use your streamlined online system to note how much cash is exchanged and why. When you make a cash payment, ask for a receipt to support your recordkeeping when you update the transactions later. Separating your accounts doesn’t mean that your business doesn’t pay you, of course.

Bookkeeping Tips for Small Business Owners

If you don’t use QuickBooks, you’ll want to find a local accountant who is familiar with your software. Another option is to use an online bookkeeping firm that will help you get started and then perform crucial duties for you each month. See our guide to the best online bookkeeping firms for our top recommendations. There are many great choices for small business accounting software, but setting up a system properly is complicated. The better the program is tailored to your business, the easier and more beneficial it’ll be to use. Bank reconciliations can vary in difficulty based on how you account for expenses.

There are plenty of options to choose from in this regard, so you can find a system that best works for you. As a business owner, you should know that late or unpaid invoices may adversely affect your cash flow. Allowing clients to keep your money for an extended period is not a good idea. You’re usually liable for all purchases and payments if you operate a small business. Even if you’re the only one with cash, it’s best to keep your personal and business accounts separate at all times. Trusting the financial details of your business with anyone can be a big step.

Bookkeeping Tips For Small Business Owners

Review your business plans, financials, tax deposit amounts, payroll procedures and tax strategies. The cost of taxes is too high to leave your plans to chance. Just a few minutes on a regular basis can save thousands of dollars. Also, remember that your CPA Is purchase return a debit or credit should be bringing you strategies and ideas in these meetings. If the meeting consists of you throwing out ideas and your CPA shooting them down, you have the wrong CPA. Find a planner who is reaching out to you with ideas and strategies on a regular basis.

Are you interested in hiring a well-trained and professional small business accountant to help you manage your business’s bookkeeping? Accounting software can sometimes be exceedingly difficult to operate and complicated, especially if you do not know what you are doing. That is why hiring a trained accountant to stay on track with your business’s bookkeeping needs is essential for your business.

Third, if your business truly operates as a separate entity, you’re offered the full legal protections given to companies. Sorting through personal transactions in your business account is time-consuming, is expensive, and can lead to mistakes. For more guidance in this area, read our guide on how to separate business and personal finances. Keeping personal and business bank accounts and credit cards separate will make bookkeeping much easier and help maintain your corporate veil if you have a formal entity.

• Details like these can be easily input into your accounting software, which then uses the data to generate invoices.
• The bulk of these accounting software programs is easy to use and understand.
• Using the most current software, vendors send their invoices directly to the application for processing.
• Furthermore, it refrains you from using cash and thus losing receipts will be a thing of the past.

Understanding the difference between invoices and receipts will allow you to differentiate between the two in your bookkeeping. With everything else you’re juggling as a small-business owner, it’s tempting to keep postponing your books. After all, you’re in business because of your proficiency in your field, not because you enjoy bookkeeping (unless, of course, you offer financial services). “Founders are typically smart, and [handling my own bookkeeping] is what I would do too,” she says.

A good bookkeeper must be highly organized with a strong attention to detail. They must also be reliable and trustworthy, communicate effectively, and specialize in problem-solving. Prior experience working with businesses in your industry is also a plus.

Make Sure to Keep Business and Personal Finances Separate

In some cases, separating funds is not something your business can opt out of. If your business is an LLC or a corporation, you must open a separate account for business. Co-mingling expenses might not seem like a bad idea at first, but it can quickly cause huge headaches for your small company.

Admiring your profits is always fun, but going over ledgers and calculators? Some expenses you can forecast, while others are unexpected. But if you plan and prepare for the unexpected, your business will be much better off in the long-run.

Automation can also minimize the number of errors by removing the human element from the equations. One is more straightforward while the other might provide better insight. Which one is right for your client will depend on the nature of the business, government regulations, and the size of the business. “Find someone you get along with and who will partner with you on your long-term goals rather than just filing your taxes,” Hattrup says. If you do decide to outsource your bookkeeping, both Eversmann and Hattrup have suggestions on what qualities to look for in an individual or a firm.

If you’re consistent, you’ll always have a complete financial picture to make smart, data-driven business decisions. And you won’t be scrambling to prep your books come tax time. Instead of manually entering timesheet data into the system, you can opt to automate these processes. Furthermore, with time-tracking and payroll automation, you can rapidly enter this information into your bookkeeping system.

“Your software and your books are only as good as the information [you] actually enter,” she said. “Everyone is interested in preparing good, accurate books,” Bingham said. Expense receipts are small and fiddly and can easily get lost and forgotten. Often not prioritized, these receipts add up over a year to a lot of money. Concepts and guidelines from Small Business Britain can be applied to your business wherever you are. Use online business support systems to upgrade your business practices and encourage new opportunities.

Signs You Need to Hire a Bookkeeper

While money is taken out of each paycheck when you’re a salaried employee, you’ll need to take care of this yourself as a freelancer. Set aside a bit of cash each month, in a separate savings account. This can be used in place of automatic deductions by an employer.

Emergencies, accidents and mistakes cost money and can disrupt your cash flow. For example, a long-term client could suddenly go out of business, or some of your equipment could break down. You may wonder, “How much is an accountant for a small business? ” The average hourly fee for an accountant ranges from $30 to $55 but can change depending on where you live and the services requested. One of the causes of business failure is poor management of funds.