Every strong and successful business relies on an efficient bookkeeping operation. You need reliable information data about your company finances from day to day so you can make confident, informed choices in the moment.
You also need a smooth bookkeeping process that doesn’t distract you from more central work unless you can have someone else working full-time on your accounting. If updating your books requires stopping everything else to troubleshoot every time, then you’re not helping your efficiency or your bottom line.
Maybe you’ve already got an effective system you’re simply trying to maintain, or perhaps you’ve struggled with bookkeeping so far in your business. Either way, a new year is an opportunity to start from scratch and try something new. Here are seven critical pieces to consider as you establish your bookkeeping plan for the year ahead.
1. Separate Personal and Business Items
One important bookkeeping tip for entrepreneurs is to be careful about keeping all your personal accounts and expenses separate from business-related costs. You’ll eventually need to gather all your business expenses so that you can properly claim deductions on your tax return, and you can save a tremendous amount of time and effort by separating those transactions from the beginning.
Ideally, you should have a separate card and checking account you can use exclusively for your business costs apart from your own personal account. This might not seem intuitive, especially if you’re just starting out or you’re the only person involved in your business, but it’s worth it. Keeping your business finances separate is important for tax purposes, and it also makes it easy to check on your company cash flow with just a glance.
2. Set Up a Plan to Put Money Aside for Next Year’s Taxes
You should be prepared for whatever’s coming in tax season, so start thinking ahead and see what you can do to avoid problems in the future. If you often find yourself owing extra money when you file your return, save money in advance to help you cover those costs.
If you don’t end up needing all the money you set aside, then it’ll be an unexpected bonus, and that’s much better than having to find money at the last minute to cover an unexpected shortfall on your tax bill.
3. Review Auto Payments and Billing
The beginning of the year is an excellent time to take a moment to look over your finances and review all the regular inflows and outflows. What regular payments are you making on money you owe, and how consistently are you billing and getting paid for the money owed to you?
Assessing these flows back and forth will give you a good sense of your general financial health, and it might alert you to some issues that need to be addressed.
4. Eliminate Unneeded Subscription Services for Your Business
As you go over your accounts and double-check on all of your automatic payments, ask yourself which recurring expenses are essential for your business and which ones aren’t.
Do you have subscriptions for particular programs or publications you barely use? Consider cutting those costs if you’re not getting the full benefit of those services you’re paying for. Even small costs can add up to a significant amount of money when they’re consistently drawn out of your account over a longer period of time.
5. Go Paperless!
Mail notifications are easily lost, either in transit or in the clutter of papers once they arrive. Going paperless lets you simplify and streamline your process.
In 2022, you shouldn’t depend on mail notifications to remind you to pay bills and check up on your various accounts. You should set up a running list of regular outflows of cash, and the actual payments should ideally be automatic, which makes it one less task for you. You don’t want to be rifling through your mail every week to find payment information.
6. Track Everything – Future You Will Thank You
Effective small business bookkeeping depends on a thorough record of all your financial transactions. You must track all of your revenues and expenses. If you don’t, your records won’t be worth much.
The better you are at tracking everything, the better off you’ll be in the future. You’ll have the information at your fingertips for business planning, tax filing, and more. Tracking expenses will be especially valuable when you’re claiming deductions.
You can deduct many of your business expenses from your taxable income, which reduces your overall tax burden. To claim them, you have to remember to record them. Keep your receipts and categorize them so you’ll be better off later.
7. Outsource When You Need Help
Smart bookkeeping means knowing when you can’t do it on your own. If the amount of effort involved or the expertise required is beyond you, don’t try to make yourself into something you’re not. Focus on your strengths and go outside of your business to find the skills you need.
1-800Accountant’s Expert Bookkeepers Can Save You Time and Hassle
Business accounting pays dividends, but it can take a lot of work and expertise. You don’t have to do it by yourself! Bringing in professional help can save you time and money in the long run.
Don’t waste time stressing over your preparations for the year when you can share the load with expert bookkeeping services from 1-800Accountant. Get your personal guide to walk you through it and set up a system and a process that will work for you and your small business.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.