You may be an expert in your field, but as a small business owner you need to wear a number of different hats, and you’re probably not an expert in everything. For a lot of business owners, small business accounting is an intimidating challenge. You can work hard, have lots of happy clients recommending you to their friends, and still find yourself wondering why your bank account is empty at the end of the year.
But good bookkeeping will not only help you understand where your money is going, it will help you spot problems before they start. Diligent small business bookkeeping is the key to cash flow management. So to help your business thrive, we’ve collected some bookkeeping basics to help you stay on track:
Record Every Transaction
Making sure you keep perfect records will make it much easier to learn how to do accounting for small business and pay taxes. Record every payment you make and all the money that comes in, even if a client reimburses you or it’s just a dollar you found on the sidewalk. Keeping good records builds a strong foundation for all of your basic accounting for small business. Just make sure to keep everything organized after you’ve written it all down.
Planning ahead is the key to basic bookkeeping for small businesses. Writing out a detailed budget will remind you to set aside money for things like office supplies, marketing, and taxes so you don’t get a nasty shock when tax season rolls around. It will also help you set benchmarks so that you’ll know early on if you need to up your game or can afford to take a break.
Separate Business and Personal Transactions
The best thing you can do for yourself here is to have separate business and personal bank accounts with separate checkbooks and credit cards. It will make it easier to solve problems later when you come across mystery expenses and will make your accounting paperwork a piece of cake.
Now that you’ve set benchmarks and are keeping clean, careful records, you actually have to look at them sometimes. Set aside time weekly, monthly, and yearly to go over your records and make sure every cent is accounted for. and that your paperwork is up to date. This is also a good time to check that your financial goals are on track and to follow up with clients about billing.
Take Advantage of Technology
Small business bookkeeping software can be your best friend and is a great way to learn how to do bookkeeping for a small business. It keeps all your records in one place, with backup, and even does your small business invoicing. Some offer even more, including automation, tax preparation, and credit card processing. These kinds of features can save you time and help keep your bookkeeping streamlined.
Emergencies cost money and can disrupt your cash flow. That’s why it’s important to be prepared. Always leave some money in your bank account, get good general liability insurance, and invest in high-quality equipment and employees who will be there when you need them.
Save for the Unexpected
Not everything will be covered by insurance: a long-term client could suddenly go out of business or some of your equipment could break down. As you are surely well aware, business includes a lot of ups and downs and having some savings can get you through tough times. How much you’ll need will depend on your specific field, but make sure to include it in your budget.
Plan for Growth
It’s easy to forget to think beyond how much it costs to make your product and how much you’ll charge for it, but growing your business costs money beyond that. You may want to advertise, or at least to create high-quality marketing materials, which cost money. You may also want to expand to offer new services that will require more equipment and manpower. Don’t forget to set aside both time and money to work on growing your business.
Create a Financial Report
Consider yourself an investor in your own company. At the end of the year, write a report. Include your benchmarks and compare your results. Even if you’re the only one who reads your financial report, writing it will make sure your records are in order and you have all the information you need to plan the next step.
Consider Professional Help
Bookkeeping takes time. Depending on your income and how much you dislike dealing with paperwork, it may be worth investing in professional help. Not only will it reduce stress, it will free up time for you to spend on your core business.
Learning how to bookkeep for small business is a process that every business owner needs to deal with. But if you stay on top of it and find a system that works for you, you can keep your business financially healthy for the long haul.