5 Overlooked Bookkeeping Tips for Businesses
From managing employees and expenses to growing sales, having your own business can be overwhelming. Bookkeeping is a vital part of keeping your business running smoothly, and we know how hard it can be to not only get started, but stay on top of it and keep organized. Whether you use some type of bookkeeping software or manually keep track of your financials, surprises come up, paperwork gets forgotten, and deadlines get missed.
Here are just a few bookkeeping tips for fast-growing business owners to keep in mind:
1. Plan, enact, review and repeat.
Benjamin Franklin is noted as saying, “If you fail to plan, you are planning to fail.” And as a small business owner, you owe it to your team, clients and, most importantly, yourself to properly plan. It is critical to not only have a plan, but to continually revisit it. It is equally important to adjust as needed and communicate the plan to your team and partners (e.g. investor, accountant, banker, lawyer, etc).
We recommend having a budget so that you may enact a plan that accounts for major expenses which can help your business properly allocate funds for anticipated future projects.
Also, by analyzing your business’ seasonal ups and downs, you will be prepared for slower months when you are less busy. By staying up to date, your business will be less likely to miss out on opportunities because you will have planned for when money is unavailable and expenses are unavoidable.
2. Track expenses
Tracking business expenses and even business mileage via software and apps like Quickbooks, Expensify, Hubdoc and others, are crucial to taking advantage of as many tax write-offs as possible. Another easy way to implement this is by having a credit card solely for business use. Some credit card companies even provide year-end summaries that categorize expenses so you can see which costs are related to each aspect of your business. This offers a high-level view of where you are spending the most and makes you less likely to miss expenses that could be tax write-offs.
3. Record deposits correctly
You are less likely to pay taxes on money that isn’t income by recording your deposits correctly. Find a system that works for you: a notebook, an Excel spreadsheet, or a bookkeeping software like Quickbooks, Xero, Harvest or FreshBooks. As your business grows, countless deposits are made throughout the year, including revenue, cash, and sometimes loans from your personal savings. Recording deposits correctly will help your bookkeeper decipher what is actual income, helping you avoid paying additional taxes.
4. Set aside money for paying taxes
CPA's and tax return preparation experts will tell you they find most business owners don’t consider setting aside money in their yearly budget for paying taxes. Allocating a portion of money during the year for taxes can help your business avoid penalties and interest from the IRS for not filing quarterly estimated tax payments and annual tax returns on time. Keeping track of tax deadlines on your calendar, along with allowing yourself the correct prep time to make sure the funds are available, will help you make payments when they are due.
5. Keep a close eye on your invoices
Paying close attention to your outstanding invoices will help you avoid late or unpaid bills, which can hurt your cash flow and bottom line. Assign someone in your business to track your billing, preferably an experienced bookkeeper. Then put a process in place for issuing a second invoice, making a phone call and levying penalties, such as extra fees at certain deadlines. You want to have a plan in place if invoices remain delinquent for 30, 60 or 90 days. Remember that just because an invoice is sent out doesn’t mean you are done with billing and that each late payment is an interest-free loan that can hurt your cash flow.
Having a system in place and these bookkeeping tips will keep your business financials clean and organized. This ensures that when the time comes, you are not scrambling, wasting time and, most importantly, wasting money on premium expedited bookkeeping services that could have been done throughout the year. If your company or small business is in need of bookkeeping services, we would love to help!