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.
As 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 critically important to not only have a plan but 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 you 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 more, which 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. And some credit card companies provide year-end summaries which categorize expenses so you can see which expenses are related to each aspect of your business. This gives you 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 whether it’s a notebook, an Excel spreadsheet, or a bookkeeping software like Quickbooks, Xero, Harvest or FreshBooks. As your business is growing, you are making countless deposits 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
CPAs and tax return preparers 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 throughout 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 regular bookkeeping system in place will keep your business financials clean and organized.This way 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.