One major perk of having a professional handle your Bookkeeping for Small Business is that you can keep a track of your expenses. Your partner would also help you analyze which expenses fall under which header, and the easy reports would let you know if in case you are overspending on something, or you can cut back in any way. Not many people love working with numbers. Even if they do, they cannot spare much time especially if they have a small business to run. Working with an Outsourcing Accounting Firm would be a good idea as you will get all the important facts right on your fingertips and all the paperwork at the right time.
When you are a small scale business owner, chances are that your workflow is pretty tight. Planning for major expenses would be a great idea. Forecast your major expenditures for the next five years and plan out a way to meet those expenditures as and when it comes.
On the whole, hiring an outsourcing partner for managing online bookkeeping services would not only reduce your costs but maintain a smooth cash flow in your business.
Bookkeeping for small business also includes reports on bills payable and receivable. This would help you keep track of the amount of money that you would receive or you would need to pay in the near future. Keeping a steady eye on top ten bookkeeping for small business tips would help you manage your workflow in a much better way.
Top 10 Bookkeeping Tips for Small Businesses
1. Separate Business and Personal Expenses
Having a dedicated business bank account for checking and savings saves you precious man-hours when it’s time to tally up deductible business expenses. Out of the gate, get used to using different bank accounts for business and personal purchases. If you’re contributing capital to your business out of your personal assets, make sure you clearly document the contribution.
Maintaining a dedicated business bank account and business credit card will also help you limit legal exposure to business debts if you have a limited liability company (LLC) or corporation.
In general, you can not deduct personal expenses on a business tax return. If you use property both for business and personal use, such as a car or home office, then the portion of the time you use the property for business is deductible. Otherwise, deducting personal expenses on a business tax return is not allowed. The penalty can be as high as 75% of the additional tax amount owed.
2. Track Your Expense
Label and categorize each expense, and track your cash flow to ensure that you can maximize tax write-offs and credits. Dollars add up quickly and you can easily run out of money. Use your business credit cards for all purchases and you won’t end up with a wallet full of paper receipts to sort through. This also means you can earn rewards and cashback for your spending. Accounting software will also store copies of checks and invoices that you’ve paid. When cash is your only option, file digital copies of receipts in your accounting software. Your chosen accounting method will impact when to record expenses and income.
Read More: How Can I Improve My Cash Flow and What Should I Do in an Emergency?
3. Accurately Record Income
Loans, revenue from sales, and other cash infusions are easy to lose track of, but you need to keep tabs on all your incoming cash flow. If you don’t, you could end up underpaying your taxes, and that can lead to avoidable IRS penalties. As with expenses, your accounting method will determine exactly when to record income.
4. Consider Hiring a Professional, Even If Temporarily
Hiring a professional bookkeeper or accountant, even for just a few hours per week or month, can make a big difference. The work of a bookkeeper and accountant overlap, though a bookkeeper is mainly concerned with recording and classifying income and expenditures. An accountant might also file taxes and help you with strategic planning.
A professional will keep your records up-to-date and orderly, and a pro is better equipped to know about potential fees, loopholes, or additional tax deductions for which you might be eligible. Understanding different IRS provisions and requirements can help you get tax advantages and save time. The average small business owner can bring in about $320,000 in new business annually by offloading accounting responsibilities to a pro. Just be sure that when you do hire an accountant, they speak to you in a way that you can understand.
Read More: Best 5 Tips to Find a Great Personal Accountant
5. Automate Accounting Practices With Accounting Software
Accounting software is a great tool for virtually any small business. You can use it on your own or give secure access to your bookkeeper or accountant, should you decide to hire one. QuickBooks is the best-known accounting software, though there are several smaller competitors now as well. You should be able to link your bank account or credit card to any good accounting software. The software will then track your income and expenditures, categorize them, allow you to send and pay invoices, and generate reports. QuickBooks even has a ProAdvisor program to help you find a local QuickBooks expert if necessary.
Read More: – Top 10 QuickBooks Tips To Simplify Your Efforts
6. Dedicate Time to Update Your Books
Block out weekly time in your calendar to get the necessary paperwork in order and avoid letting receipts and invoiced receivables pile up. Make sure to stick to the time you’ve set aside. This can save you a lot of catch up work as tax season nears. Accounting software, such as QuickBooks, can save you time here by automatically categorizing income and expenses and reconciling your bank accounts and credit cards.
7. Keep Tabs on Labor Costs
Paying employees, including yourself, might account for as much as 70% of a business’s total budget. Take note of overtime, perks, and other benefits you offer to prevent over- or underpaying. Your accountant or accounting software should also be able to help you calculate and pay your payroll taxes, which have different rules and deadlines than income taxes.
8. Expect Major Expenses
Computer upgrades, equipment replacement, and tax deadlines shouldn’t come as a surprise. Larger capital expenses often come up during slower months so plan ahead to avoid a cash crunch. The good news is that an IRS provision called Section 179 lets you deduct up to $1 million of business property and equipment in the year of purchase, instead of depreciating the equipment year over year. Even if you feel the pinch of large purchases now, you might benefit from tax breaks later.
9. Maintain Inventory Records
Theft costs U.S. businesses $50 billion each year and can throw off your books. Avoid misplacing merchandise or theft by noting dates purchased, stock numbers, purchase prices, dates sold and sale prices. The more organized, the better. You can buy stand-alone inventory management software to help you with this task, or many accounting software integrate with inventory management tools.
10. Follow Up on Invoices and Receivables
Just because you’ve sent an invoice doesn’t mean you’ll get paid. Avoid overpaying on taxes and hours spent sifting through your revenue account and receivables listing by circling back with vendors who owe you money. Send invoices right after a job to increase the chances of prompt payment, and follow up with friendly reminders as the deadline approaches. You can even offer early payment discounts to incentivize your customers to pay quickly. Accepting online payments and using cloud-based accounting software can also help automate this process for you.
At Rayvat Accounting provide Affordable Bookkeeping for small business. Join hands with us, Feel free to Contact Us for more details.