Small business owners wear many hats, from customer service rep to manager and even accounting. Hiring an accountant should be part of the plan, but until then, it's important to make sure your books are accurate and up to date.
Use these eight tips for bookkeeping success.
1. Track Your Business Invoices Like a Hawk
If invoices go unpaid, send a friendly reminder and do not allow that client to order any more work until the previous order is paid.
2. Review Your Books Weekly
Set aside time each week to review your books and the state of your business. A weekly review period will give you time to look over your invoices, look over your expenses and manage your cash flow.
If you're not reviewing your books on a regular basis, you'll have a hard time staying on top of taxes, planning for future expenses and understanding the financial state of your business.
3. Go Paperless with Cloud-Based Accounting
Cloud-based accounting programs streamline the bookkeeping process and reduce the risk of human error.
QuickBooks is one of the most popular cloud-based accounting solutions, and they offer special packages for small businesses. These packages provide basic templates for documents, including deposit slips, invoices and check printing. If you're unfamiliar with this program, there are courses you can take to .
4. Set Aside Tax Money
No one wants to think about tax season – especially small business owners. But setting aside money for taxes will help you be prepared for that dreadful time of year.
That savings will help you avoid last-minute scrambling for cash or having to take out a loan to cover your tax bill.
5. Plan for Major Expenses
Budget for major expenses, like office supplies, inventory and maintenance. If you plan for these purchases, you won't have to worry about scrambling to keep your cash flow in check.
Aside from these everyday – but essential – expenses, you also want to make sure that you're setting aside money for seasonal ups and downs, and inevitable purchases you will have to make in the near future.
If your computer needs an upgrade or a winter storm knocks out power for a week, you at least have a cash reserve to get through it.
6. Track Expenses
Experts recommend getting a business credit card, which can act as a basic accounting system. Credit card companies typically categorize expenses, so you'll get an overview of your activity.
Using a business credit card eliminates the risk of losing receipts and missing out on tax write-off opportunities.
If you plan to pay in cash, make note of any business lunches, trips, events and coffee dates in your day planner. Having record of the business-related activity will substantiate the write-off come tax season.
7. Record Your Deposits Properly
Create a system for organizing your financial activities. Whether you use a cloud-based accounting system, an Excel spreadsheet or pen and paper, organizing your deposits will help you avoid paying taxes on money that isn't income.
Your business makes a variety of deposits throughout the year, including sales revenue, loan funds, and cash infusions from your own savings. At the end of the year, you may wind up categorizing the wrong deposits as income and have to pay more taxes than you need to.
8. Keep Your Financial Documents in Order
Every small business owner should take their bookkeeping duties seriously, and that means keeping your financial documents in order. Make sure that your balance sheets, profit and loss statements, sales invoices, sales receipts and services rendered documents are in order and easily accessible.
Having these documents on hand and organized properly will ensure that you have all of the data you need at all times. Whether you're applying for a loan or dealing with an audit from the IRS, you're prepared to make your case.