Running your own small business is no easy feat. As an entrepreneur, you have a long list of responsibilities, from recruitment to management to finances. A major component of maintaining your business’ finances is bookkeeping, which refers to the day-to-day tasks of recording and managing your company’s financial information. Its ultimate goal is to assist you in making sound financial decisions for yourself and your organization.
Small business bookkeeping can be a complex process. To facilitate your handling of your finances, let’s take a look at some of the key do’s and don’ts for small business bookkeeping.
You’ve likely heard the old adage “Don’t mix business with pleasure.” The same principle applies when it comes to finances. Specifically, do not mix your business-related finances with your personal finances. Doing so can blur the lines between which transactions were for which purpose. While this may not seem like a big issue, it can cause a huge amount of problems in the long run, particularly when you’re trying to file your taxes for your small business.
To avoid these challenges, open a separate bank account for your business. This will help clarify the nature of your expenses. You’ll know that any transactions made from that account were for business purposes.
A key part of effective small business bookkeeping is hanging onto and organizing all your relevant documentation. Such documentation includes everything from receipts to invoices to wage records.
This is incredibly important for two main reasons. Firstly, it facilitates tracking; effective tracking is useful because, if any issues or queries arise, you’ll have the answers already laid out. Secondly, these documents can serve as proof if a tax agency decides to audit your company.
Whether it’s once a week, once a month, or on a quarterly basis, establish a regular invoicing routine and stick to it.
Sending invoices to customers in a timely way is a vital step in small business bookkeeping. Not only does it ensure that you get paid on time, but it communicates to the client that you are well organized. Plus, it’s better for the customer to receive invoices promptly so they know exactly how much money they need to set aside to pay for your services.
Small business bookkeeping can be complex, especially if you’re new to the process. There’s no shame in asking for help from an expert. If you’re feeling overwhelmed by the process, consider reaching out to a professional bookkeeping firm, such as Geekbooks. Not only can these specialized bookkeepers keep your money in line, but they can even offer you financial ideas to help your company grow.
Small business bookkeeping comes with a relatively steep learning curve. By reading this guide, you’ve taken an awesome first step in easing your learning journey. By understanding the do’s and don’ts of small business bookkeeping, you’ll have a better chance at optimizing the process and avoiding costly mistakes.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.