When it comes to your bookkeeping as a small business, it is often tempting to do things informally. It seems like there aren’t as many expenses to remember, so it’s easy to go through things in your head, and just tweak things as you go.
However, with an informal system like this, you may end up forgetting important dates or documents, ending up with budget mishaps, or any number of unfavorable surprises. It’s important that you keep your bookkeeping clear and up to date in order to feel financially prepared for every aspect of your business. Here are five tips to help you achieve that.
- Track Your Expenses: This seems obvious, but it is incredibly important to track all of your expenses for tax purposes. If you miss putting in some money, you could miss certain tax write offs. Not to mention, if you’re just rounding, in an audit those exact numbers can’t be proved, so your write-offs may be thrown out. Try using something like a company credit card for all business purchases, and make notes of costs or mileage all business related activities, including lunches, coffees or business trips.
- Watch Your Invoices: There should be someone specifically in charge of billing in your small business. Figure out a warning process close to the due date if the bill isn’t paid, and decide on the punishment, increasing the further it gets from the due date. You want to make sure companies know you’re serious, and this can prevent harm to your cash flow.
- Record Everything Accurately: While this seems like a no-brainer, it isn’t always done. Specifically deposits should be monitored accurately, as they come from many different sources. If some of these are accidentally recorded as income, you may have to pay more taxes.
- Plan Ahead: Schedule events as far as you can in advance, and plan your budget for them. Things like computer upgrades take a large chunk out of you finances, and need to be in your financial plans. Take into account business seasons ups and downs in order to be realistic, which will make you less likely to need to scramble for a loan when these types of events inevitably come up.
- Be Prepared for Tax Season: Taxes are typically an incredibly stressful time for businesses. Relieve some of that stress by setting aside some money throughout the year for taxes, as well as noting all deadlines and prep time in your calendar to be as prepared as possible.
With these bookkeeping tips, you’re sure to keep your business running smoothly and your finances in order.