Maximize your profits and get an accurate understanding of business performance with organized bookkeeping. Complete books will also help you avoid cash crunches and strengthen your negotiating position. Follow these 8 tips for a start on great books:
Keep Business and Personal Transactions Separate
Open separate banking and credit card accounts for your business and then only use those accounts for business transactions. All your business transactions should be in the business accounts. Bank statements that have business and personal transactions mixed in will become messy quickly.
The extra effort to set up separate accounts for personal and business transactions will pay off. Cleaner books will help outsiders understand your business, and that is essential for business financing as well as personal matters like getting a mortgage.
Cleaner records will also give you an accurate picture of how the business is doing. An accurate assessment of the business is necessary to grow profits.
Adopt a System to Stay Organized
Minimize the time spent on bookkeeping with and organized, consistent process. An efficient process will free up your time to focus on growing your business. There is no need to overcomplicate your system. It can begin with something as simple as a written income and expense log. (An expense log is available here)
Track Invoices and Aging (time outstanding)
You need to keep money coming in to succeed. For most small businesses this means invoicing. The best way to keep invoicing current is to have an organized system for tracking invoices, when they are due, and how long it takes to get paid. A consistent process of when invoices and reminders are sent will set client expectations and encourage payment. Avoid cash crunches and know when money is coming in by tracking invoices and due dates and past dues.
Regularly Review Bookkeeping
Act on opportunities and spot risks by regularly reviewing your business financials. Budget time weekly or at least every two weeks to review financial performance. Do a through review after each month end. Regular reviews will give insight into business performance, identify opportunities, and help you adapt to changes.
Reconcile Accounts Monthly
Be sure your books and bank statements are accurate by reconciling monthly. (We have caught many duplicate and overcharge transactions by reconciling credit card accounts.) Monthly reconciliations are a good practice and ensures your records are complete.
Payroll is important. Paychecks are important to employees; payroll taxes are important to the IRS. Compliance mistakes are costly to the business owner. Payroll is a complex but competitive business and there are reasonably priced providers that can help you avoid mistakes.
Track Business Mileage
You can realize potentially significant tax savings by tracking business use of your vehicles. You may be able to deduct a flat per mile rate or actual expenses for business use. Good records are a must for either method. The IRS has specific requirements, and the records must be written. A form for recording business miles is here.
Maintain Your Records
For loan applications, tax compliance and other uses you need to be able to substantiate your financial statements. A consistent, reliable system for recordkeeping will help you take advantage of opportunities that come your way.
Bring in help when you need it. There are many benefits to efficient bookkeeping, and accurate bookkeeping is required for tax and other purposes. Do not hesitate to talk to professionals when you have questions or need support. Bookkeepers can help with monthly reporting, invoicing and accounts receivable, account reconciliations and more. Catchup bookkeeping is available if your records have gotten messy or fallen behind. A good bookkeeper will be able to offer a package of services that suits your business, freeing you to focus on growing your business.
For help with bookkeeping and taxes, please call Aaron Hoffman at 203-548-0220.
This site contains general information. Each situation depends on its unique facts. Do not rely on this content as a sole source of information. Seek professional advice before taking any action based on this information.