Small Business Bookkeeping Tips

Small business bookkeeping tips. If you are going to own and operate your own business, you better know how to keep your books; Bad bookkeeping can cause significant losses, create a myriad of problems from purchasing to expansion, and they can really get you into trouble with the tax man. You don’t need to be a CPA in order to run good books, but you do need a little know-how; And this is a good place to start.

Small Business BookkeepingChoose the Bookkeeping System that is Right for your Business

Not all bookkeeping systems are created equal. Typically businesses run on either a cash based accounting method, or an accrual based accounting system. You would use a cash based method to count the income you receive as it comes in to you. An accrual based method is used to count your income and expenses as they occur, not when you actually have it in hand. If you accept credit cards, which are recorded before you receive the actual funds, or if you keep inventory on hand, you would probably find that accrual based accounting is a better fit for you.

System Takeaways:

  • Cash based accounting allows you to count your income as you receive it
  • Accrual based accounting allows you to count your income as expenses and income occur, not when you have the money in hand
  • Use accrual based accounting if you accept credit cards for transactions or if you maintain inventory on hand

Keep Track of Your Expenses and Income Daily

If you want to have an accurate picture of your financial status, then you need to update your records on a daily basis. Whether you use a pen and paper or a sophisticated computer spreadsheet is not really the important thing. What is important is using your system every day. While it may take a little while to set up a good system, once it is up and running it will only take a few minutes for you to update your records each day. For instance, keep all of your receipts and log them into your system. It helps if you organize your records, separating them by year and by category (i.e.Receipts 2009; Rent, Fuel, Utilities).

Tracking Your Expenses Takeaways:

  • Keep your receipts and organize them
  • Keep good, thorough records by logging your expenses and income; Update your records daily

Handle your Checks with Extreme Care

Checks can get away from you in a hurry, so it is important that you review each cancelled check carefully. Don’t just file them away without going through them, you wouldn’t do that if it was your cash being used. Treat your checks as if they were cash because in the end if there is a mess up it is on you, not the bank. Use a signature on your checks that is distinctive and cannot be forged. As you look through your canceled checks, keep your eyes peeled for unauthorized charges. YOU look at them first, before anyone else gets their hands on them. If possible, it may be a good idea to require a co-signature by a partner on all checks that are written.

Handle Your Checks Takeaways:

  • Review your canceled checks thoroughly
  • Treat your checks as carefully as you do your cash
  • Use a distinctive signature that is difficult to forge
  • Consider requiring a co-signer on all checks

Keep your Records Audit Ready

Organization is vital in keeping your company’s records. File all of your receipts, checks and invoices. Keep checks as well as invoices in numerical order and don’t skip any numbers. If you void a check, write VOID on it and file it in with your cancelled checks. Do the same for voided invoices. You should also separate your personal finances from your business finances. You want to keep a clear line dividing the two. Finally, separate your checks and invoices by month and year. That way if you are ever audited your records are easily accessible and organized, making the audit fairly quick and painless.

Audit Ready Takeaways:

  • Keep all checks and invoices in numeric order; and do not skip any!
  • Separate your personal finances from your business finances
  • Keep all receipts and records organized and separated by month and year

Use a Computer for your Bookkeeping

Computer bookkeeping software can make your business bookkeeping a breeze! Find a good program and use to automate your financial reporting and summarize the financial activities of your company. It can help you prepare your tax documents and keep your records safe by providing a back up. There are some really good ones on the market, just determine what you need yours to do and find one with the features that you need.

Computer Tips Takeaways:

  • Bookkeeping software can automate your financial reporting
  • Bookkeeping software can prepare your tax documents
  • Bookkeeping software can provide a back-up of your records