6 Top Bookkeeping Tips for Small Businesses

Bookkeeping tips for small businesses

Are you interested in learning some of the most important bookkeeping tips for small businesses? If you are the owner of a small businesses, you must do many jobs to keep your company running. Bookkeeping is where many owners struggle since it can be tedious and frustrating. It requires a lot of industry-specific knowledge to do it well. 
Small Business Report shows that 60% of small business owners do not feel confident with finance or accounting. This is tragic because without good bookkeeping, even great businesses can fail. That’s why we’ve compiled some helpful bookkeeping tips for small businesses so you can succeed.

1) Always separate your business and personal finances

Make sure you set up 
your bookkeeping to have clear boundaries between your personal and business finances. If there is no clear separation, you can accidentally be in violation of tax codes or you can risk losing your personal assets if your business is ever sued. 
A great way to start is to open a business checking account to set up all your business expenses. You can pay yourself a salary from there. Most banks offer business checking accounts so look for one with minimal fees.  
You should also set up your business up as an LLC (limited liability company). It costs a bit to do this, but it makes your business a separate entity and with secure options. No one will be able to go after your personal finances or assets if your business is ever sued.  
Here’s a link for how to set up an LLC in Houston, Texas. If you’re outside of Houston, here is a more extensive guide.

If this seems a bit daunting, our team at Free Weekends can help you with the set up. Click here to contact us. 


2) Keep records of everything

It’s important to keep every receipt and track all of your spending. Whatever you buy for your business needs to be recorded and can impact your finances for taxes.

If you don’t keep a detailed record, your business may end up looking like it made more than it did and you’ll be taxed higher than you should be. 

There are many items you can (and should) write off as business expenses, but you can’t do this if you don’t keep track. You’d be surprised how much you spend on business lunches, office supplies, work travel, subscriptions etc. You can even write off charitable giving on your taxes, so keep track of those as well. It all adds up! 

If you use cash for your business, you will need to track your physical receipts; however, if you keep everything charged on a single debit card, you can track your expenses more easily from your monthly bank statements. 

3) Maintain P&L Statements, even when you’re small

The overall goal of bookkeeping is to use financial data to help owners make the best decisions possible. A great way to do that is through profit/loss (P&L) statements.
P&L statements track revenues, costs, and expenses for a business. Even though they are not legally required for small businesses, tracking this data is extremely important for understanding your business’s financial health.  
If you, as a business owner, don’t have a clear understanding of these numbers, you won’t know how much profit you’re making or if you’re turning a profit at all.  
You can easily be distracted by big revenue wins, but miss that spending is too high to turn a profit. Keeping current P&L can help you avoid mistakes that could ruin your business.  
Click here to view an example of a P&L statement.   

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4) Be proactive in managing your taxes

This is one of the most important bookkeeping tips for small businesses. Poor tax management can cause a lot of unnecessary waste and potential fines.
The IRS requires that small businesses file taxes quarterly. That means business owners need to be dealing with taxes on some level for most of the year. According to the IRS, taxes are due: 

  1. January 1 to March 31 – April 15 
  2. April 1 to May 31 – June 15 
  3. June 1 to August 31 – September 15 
  4. September 1 to December 31 – January 15 of the following year

When filing taxes so often, business owners are often in close contact with their CPA. CPAs can charge a lot for their tax services and can provide valuable benefits when it comes to tax strategy and future planning.  
However, if a business has disorganized finances, a CPA may spend all their time organizing instead of finding better ways to manage taxes.  
This means that business owners miss out on game-changing tax planning while significantly overpaying for bookkeeping work. CPAs charge between $150 and $250 per hour which is well worth the expense when they provide thousands of dollars of tax-saving help. It’s not when they’re filling in holes in your balance sheet or doing other tedious organizational duties 
Keeping your bookkeeping in order is always going to pay off, but it’s especially beneficial for taxes. 

5) Set Financial Goals

3/10 business owners statistically will be packing their bags by year two as companies go under. In order to not be one of them, you have to set clear financial goals and fight to accomplish them. 
Don’t get too caught up in the excitement of your business that you lose direction or vision. Map out a clear business plan with quarterly goals and strategize on how to meet them. When you grow, make sure your new expenses are met with new profits.  
You can’t do any of this without adequate financial tracking so stay on top of your bookkeeping will enable you to do this step well.  
If you, as a business owner, don’t have a clear understanding of these numbers, you won’t know how much profit you’re making or if you’re turning a profit at all.  
You can easily be distracted by big revenue wins, but miss that spending is too high to turn a profit. Keeping current P&L can help you avoid mistakes that could ruin your business.  
Click here to view an example of a P&L statement.   

6) Get bookkeeping help as you grow

If you have to make the choice between growing your business or doing your bookkeeping, growing your business is almost always the answer. You may eventually want to hire an in-house accountant but there are also companies that you can contract out
 the work to instead of hiring someone full time 
At Free Weekends, we offer flat-rate bookkeeping which makes that help easy to predict and budget for. We’ve been able to help our clients not only get their small businesses bookkeeping in order, but to have a better work-life balance by taking time-consuming tasks off of their workloads 
We also offer á la carte consulting services that we can adjust to meet your specific needs and can help you keep on track. 


Final thoughts

Now that you’ve gone over a few bookkeeping tips for small businesses, it’s time to go implement them. You won’t be able to overhaul your entire system by tomorrow, but constant attention to bookkeeping best practices can help you have a solid business over time. 
Contact us at Free Weekends if you have any questions or need any help! We want you and your business to succeed and grow. By having great bookkeeping, we can help make that a reality.  

Taylor Hicken

You made a good point when you shared that it is important to set clear financial goals and fight to accomplish them. It is crucial to work with a reliable bookkeeping service that can help achieve your objectives. I would like to think if a company needs to improve its business, it should consider working with a reliable bookkeeping service that is reliable and experienced.

Thanks for the bookkeeping tips. I am interested in bookkeeping. I’ll look for a professional who can help me with bookkeeping.

Impressive!Thanks for the post

I never took into account the fact that many business owners struggle with bookkeeping because it may be boring and irritating. I remember when I was a college student I was proudly answering the question but now I realize it was different. Thank you for helping me understand the right information about bookkeeping.

I found it interesting when you said that growing your business is always the answer if you have to make a choice. A couple of days ago, my best friend told me that he and his business friends were hoping to find a service that could help them with the financial reporting of their clothing business, and he asked if I had any idea what would be the best option to consider. Thank you for the information, I’ll be sure to tell him that they can consult bookkeeping services as they can provide more information about the financial process.

It’s interesting to know that bookkeeping services would help owners to make the best decisions regarding their finances. I can imagine how important their services will be, especially for startups to reach the goals they have regarding the income they want to earn. And I think it can also keep them from being short and going bankrupt in the future.

My favorite part of this article is when you said that a good accounting production for your business could help you to strive because of your opportunities. My best friend mentioned a few nights ago that he was looking for a reliable tax service that could assist with his tax planning for his future business plans, and he asked if I had any idea what would be the best option. I love this enlightening article, I’ll tell him that it will be much better if he consults a trusted CPA
tax service as they can provide more information about their planning.

It’s great that you discussed that bookkeeping must have precise boundaries between your individual and business finances. My friend is having a hard time monitoring their finances. I should advise him to hire a small business bookkeeping expert to do the job for him.

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