We have previously discussed bookkeeping tips for married couples as well as bookkeeping tips for those about to retire. But in addition to couples and individuals of all kinds, we see many business owners pass through our doors. Even those who use our bookkeeping or a similar service must still take some essential financial precautions. So without further ado, here are 5 must read bookkeeping tips for small business owners.
1. Plan for the Worst
Plan for major events through the year and adjust your bookkeeping accordingly. Each business has its up and down seasons, and it just makes sense to be ready for it. We see many business owner forego this practice by saving and spending on a consistent level throughout the year. When you’re a landscaper, hair dresser, or any in other profession, chances are your numbers are different in spring than in the fall.
The benefits of doing this include not having to take funds out of the company account during up times only to find that you are short in the slow months. This can be devastating should a costly project arise such as a:
- A major computer upgrade.
- Essential equipment failure.
- Natural disaster that affects the business.
- Legal troubles.
- Spontaneous yet costly audits.
2. Save for Taxes
Did you know that some business are required to pay taxes on a quarterly basis? Your bookkeeper can tell you if yours is one of those or not. Whether you pay four times a year or just once, it is helpful to save for taxes. This is because not paying taxes on time can come with huge penalties and even the aforementioned audit.
One of the best bookkeeping tips for small business owners is to regularly set aside a portion of income all through the year for tax purposes. Keep mandatory tax deadlines on your calendar to ensure you can make these payments when they are due. This is especially true for payroll taxes because not paying them can be illegal.
3. Keep a Record of Your Expenses
This includes not only your expenses and purchases, but those of your employees. The benefits of doing so include making sure all business related expenses are on the up and up in addition to keeping records of what may be able to be deducted or credited on a tax return. There are credit cards with great rewards programs that can be used solely for business purposes as a basic accounting system. These cards can also give you year end statements with each expense broke down into categories. While this doesn’t mean you can forego your own bookkeeping system or bookkeeper, this year end statement is still a great tool for both of you to have.
4. Monitor Deposits
Especially if you aren’t the one making deposits to your business account or accounts, it is a great tip to keep track of them. If you do undergo an audit or are accused of underreporting income, these deposit statements will be your best piece of evidence.
Additionally, small business owners make many varying deposits into their bank account during the year. Not all of this includes income, but can also be funds from loans, sales revenues, stock sales, and cash deposits from personal savings. Keeping track of these deposits will help you know which funds are tax eligible and which are not.
5. Prioritize Bookkeeping
Producing a great product or service at a great price is key to starting and building a business. Managing your income and expenses in an expert manner can be just as important. We recommend spending at least an hour a week, each week for reviewing income, expenses, etc. This will give you a great snapshot of your business, help you spot and correct mistakes, and ultimately, keep the IRS happy.
No time for the books? Get an expert bookkeeper in your area who can help.
Houston Bookkeeping Tips for Small Business Owners
And if you are a small business owner or individual who would like help keeping their books, please contact me.
