When you think of starting your own business, you think of the freedom to pursue the things you enjoy for a living. You imagine building your customer base, selling your products and services, or maybe the personal benefits of the revenue you’ll bring in. What you probably don’t think about is the finer, more mundane details, like keeping track of all your business’s financial records and expense reports. In fact, bookkeeping can be dreaded as the thief of joy when it comes to business.
This doesn’t always have to be true, however. In fact, the happiest small business is the most prepared small business in all areas, including bookkeeping. Knowledge of what needs to be done, as well as a good team, can make all the difference when it comes to small business bookkeeping. You do also want to keep an eye out for certain pitfalls, though.
DO Open Yourself Up to Help
Sole proprietors are used to wearing many hats, and in the beginning, even small business owners who don’t plan to be a one-person-show can find it difficult to delegate. However, don’t be too proud to seek help, especially when it comes to your bookkeeping. Consider the scale of your business. Have an idea of the amount of expenses you’ll have and the amount of business you hope to bring in. If you need to hire an accountant or consultant, it’s a worthwhile investment in order to help things run smoothly. The same is true if you find you need to hire an accounting team. Keep in mind that these needs may change over time as well, and be open to that.
DON’T Wait Until You Open
One major problem with bookkeeping for many businesses is that that the entrepreneur gets caught up in the excitement of a new business and thinks of accounting as an afterthought. This would be a mistake. In fact, the best thing to do is to find an accountant to discuss your business plans and finances before you open so that they can advise you of any potential flaws in your plan or ways to optimize your bookkeeping. Don’t just find any accountant. Look for one with specific expertise in your area.
DO Set Up a Separate Bank Account For Your Business
It may seem simpler to have your business and personal bank accounts be one and the same, but this will only lead to disaster come tax time. Even with accurate records of all your expenses and earnings, it can be more than a hassle to have to untangle each and every transaction to determine which one was personal and which was for your business. The best plan is to set up a separate business account. Even if you have no employees, you can simply pay yourself from your business account to your personal account, while still keeping the divide clear.
DON’T Dip Into Designated Business Funds
When it comes to your business account, you’ll want to set aside a percentage of your earnings for business expenses, such as paying vendors, purchasing supplies, and of course taxes. However, when your funds are running a little dry in your personal account, it can be tempting to dip into that business account just for a bit to tide yourself over. You’ll pay it back, you swear, but that never seems to happen. Meanwhile, tax season is approaching and suddenly that percentage you set aside for taxes is less than it should be. Although you may be able to do this occasionally in small doses, it’s generally a bad bookkeeping habit that can only lead to problems down the line.
DO Keep Accurate Records
Bookkeeping is one area where it would be a mistake to round up or down or use estimates for the most part. Make sure you’re as accurate as possible about your earnings and your expenses, which you can do by keeping track of all of your receipts, invoices, and other accounting related documents. This will save you from grave accounting errors that may seem small in the moment but could eventually sink your business.
DON’T Rely on Paper Alone
However, it can be messy and overwhelming to have a drawer full of bookkeeping related papers, and it’s a headache to deal with when tax season comes around. That’s why it’s a good idea to use a cloud based accounting system that allows you to scan any accounting documents and keep digital copies. It’s light and easy to sort through, and most cloud based accounting softwares have easy-to-use features for the whole accounting team, if need be.
Need more help to ensure that your bookkeeping runs smoothly? TCA Darwin offers bookkeeping consultations to small businesses, as well as migration help to a cloud based accounting system so that you can eliminate the paper trail and headache that often comes with bookkeeping. Contact us today for more information.