Accounting is crucial to every company, big and small. But, more times than not, it’s put on the backburner as small business owners focus on growing their brand.
But accounting doesn’t need to be an afterthought, and there are various ways to tackle it. You might hire a bookkeeper. But how much does a bookkeeper cost? And what does a bookkeeper do? Is it okay to keep the books yourself?
The bottom line is that maintaining your books will allow you to forecast your finances. It will also save you money. And we haven’t even mentioned the alerts to potential fiscal gaps.
Let’s look at how to keep books for your small business.
Maintain Accurate Financial Records
Maintaining accurate financial records is crucial. The following are the three most relevant, common items to keep in mind when it comes to your financial records.
Your Cash Book
A cash book should show all your bank account transactions and is more than a reference to look back on at tax time. It’s a tool that can be used for staying up-to-date on all your recent transactions and will enable you to start forecasting your finances into the near future.
Fill Out Sales Invoices
If you’re thinking of creating and storing your invoices, you may want to use an accounting software, ideally one that allows you to keep invoices chronologically. You should record manually created versions as well, which can usually be automatically imported into our accounting software through a mobile app or by sending a photo of the invoice to your account.
A File Containing Purchase Invoices
It’s also important to maintain a record of how and when you paid invoices (ACH, check, cash, etc.). Be sure to keep these organized by date of issue, and if possible date of payment. Maintaining this timeline will save you future headaches, that way you won’t ever be charged with a late payment fee.
Make Sure You Receive a Receipt for Every Purchase
Get into the habit of asking for a receipt for every purchase you make if it’s something for your business. Many small businesses will undergo a tax audit at some point in their life, but there’s no need to panic; this is entirely normal and is something you can prepare for.
Whenever you purchase an item online, be sure to print out the invoice right away and file it properly. It’s far easier to do this immediately rather than needing to search high and low in order to round up every scrap of paper from every expense come tax time.
But if you’re worried that your books might be seriously out of order, you may want to hire a bookkeeper. They can go through your financial records with a fine-tooth comb and help rectify anything that needs to be addressed.
Record All Cash Expenses, No Exceptions
A small business owner will need to keep track of all expenses, including cash purchases. When it comes time to pay taxes, you can deduct these costs from your income. By doing this, you can have a better idea of your profitability.
Of course, it’s so easy to lose track of your cash expenses. As a safeguard, you should get into the habit of recording them right away in your books.
Organize Your Deductions Within Reason
According to the IRS, deductions must be a typical expense in your field. It must also be necessary to the success of your business.
Let’s consider these examples. A sales representative’s business cards are an ordinary expense. But what about a $1,000 Gucci belt? It is hard to explain why that is necessary.
Even if a cost ticks the required boxes, you may not be able to deduct the entire amount from your taxes.
You can consult the IRS’s comprehensive guide on business deductions if you have questions.
Hire a Professional to Handle Your Taxes
Even though filing your taxes yourself may seem like a good idea, it can end up costing your business a lot of money down the road if you don’t hire a tax professional.
Why?
Well, you may miss a deduction you are eligible for or underpay your bill, which would result in penalties. So, how much does a bookkeeper cost?
The price varies, but on average, you should expect to pay $18 to $23 an hour or upwards of $99 a month, depending on the size of your business.
Hiring a professional who knows what they are doing will leave you in the best financial position possible. Plus, it takes all the stress away.
Organize Your Financial Information and Prepare Reports on a Quarterly Basis
It would help to organize your balance sheets, income statement, and cash flow statement on a monthly or quarterly basis.
Balance sheets should indicate your company’s assets, liabilities, and equity at a given point in time and your income statement will show the income and expenses of your business over a defined period, as well as the business’ “bottom line.” .
Make Bookkeeping a Habit for Your Business
With so much to do, it’s easy to slack on your bookkeeping if you’re a small business owner. Making it a habit will help reduce stress at tax time.
Make a point of scheduling a ‘bookkeeping day’ every month to stay on top of your finances.
Enter any missing transactions, update your bank statements, review your financial information from the previous month, and make any necessary changes.
If you find yourself falling behind, consider hiring some help. Bookkeeping software might be an option. Otherwise, hire a professional.
