Saving and organizing receipts for business expenses is an excellent way to be successful at small business bookkeeping.
Raise your hand if you absolutely love handling your small business bookkeeping requirements.
There sure aren’t many hands up – and that’s pretty common. Documenting all payments, expenses, deposits, and withdrawals can make your head spin. The good news is that there are some easy ways to simplify this process. Consider these small business bookkeeping tips for new business owners:
1. Use a simple bookkeeping process
First-time business owners are often clueless about what’s involved in small business bookkeeping, so make the process simple for you based on the approach that makes most sense for you. Write down a list of all of your expenses and sources of income. Then narrow down each of these two categories into subcategories. After doing this, you should have a solid grasp of your basic approach to making and spending money in your business.
2. Carefully track all of your expenses.
Whether you choose to use Microsoft Excel, a cool smartphone app, or any other recordkeeping tools, it’s imperative to carefully track all of the money you spend on business expenses. Save and organize your receipts so you can find them easily, and be sure you know exactly what each receipt is for. You don’t want to be spending money on products or services that are not benefiting your small business in some capacity. Plus, receipts are often necessary to claim valuable business tax deductions when filing your business taxes with the IRS.
3. Carefully track every penny you earn.
While small business bookkeeping is more about expense tracking, it’s also a must to know how much revenue your enterprise is generating. So document this financial information, including the amount you earned, where the money came from, when the money was deposited into your account, and any other relevant details. Then examine which sources of income are making you the most money.
4. Set money aside.
The operating costs of a small business can be tremendous, not to mention the business taxes you owe. These may include corporate taxes and estimated taxes throughout the year. So when it is feasible, take a small cut out of each piece of regular income you earn. This could be just $25 a week or $500 a month. If you’re in the startup phase, it’ll likely be lower, but every bit helps. Not only will you need money to cover IRS business taxes, but also you should have ample funds in your business bank account to cover large purchases in the future. Perhaps you want to open a brick-and-mortar retail store instead of selling all of your goodies online. This is a major financial undertaking. But if you plan out your small business bookkeeping and finances properly, you can achieve such a goal.
5. Expect the unexpected with your finances.
If you are new to small business ownership, be aware that your financial situation may change greatly over time. You’ll see ups and downs in terms of revenue. You’ll encounter unanticipated expenses. If you track your books monthly, examine them from time to time, but don’t read into these figures too closely as they will be fluid until you have a consistent cash flow.
Photo credit: 123RF.com