As a small business owner, you probably know about the bookkeeping involved in running your own operations. Staying organized and on top of your finances should be a priority. Not only will that help you gain insight into your business growth but will back up any financial decisions you choose to make. Here are our tips on keeping books for your small business.
1. Keep your receipts
Don’t throw receipts away! Whether it be a sale or a purchase, all your business transactions should be backed by official records that list the amount, date, and other key information. That way, you can put together summaries of your activity and report it properly when tax season comes around.
Remember that receipts don’t just include customer transactions. They can also apply to business meals, outings, and entertainment, work travel, vehicle expenses, gifts, and office-related purchases.
For tax purposes, make sure you log the purpose of the transaction: Was it a strategic planning meeting? A vendor appreciation package? A business trip? Have that information readily available, even if that means jotting it down on the back of the receipt.
As a small business owner, you might find that some of your expenses are partly for personal use and partly for your company, like cell phone bills, transportation costs, and home office purchases.
In each case, you can deduct the percentage that applies to your work. With thorough financial documentation, you’ll have the records you need to back up your claims.
To speed up and streamline the organization process, try out different apps and software that can do most of the work for you when it comes to managing and organizing your business.
By scanning receipts and generating reports all in one place, you won’t have to transfer your financial data every time you’re building reports. Here are our top picks: 11 Best Business Apps to Download.
2. Track your expenses
Tracking revenues and expenses should be a foundational element of your business. This will help you answer questions about your operations, prepare tax returns, and measure how you’re growing over time.
Right from the start, make sure you have a system in place for keeping track of all your transactions. Consolidating your receipts in one place will make the process that much simpler when it comes to building reports like balance sheets, making calculations, and measuring business growth. That’s why bookkeeping is a central part of running a business.
3. Establish bookkeeping procedures
Set up a bookkeeping routine as soon as possible so that you can follow a consistent process every time. Whether that be organizing paper receipts with folders or using an accounting software and keeping your books 100% virtual, follow the same steps regularly to ensure that nothing slips through the cracks.
The more transactions you have, the more often you should update your records. While there are plenty of DIY options out there, you can also hire help. Read our tips on the SmartBiz Small Business Blog. Our article will help you decide if you need to bring in a professional.
On a regular basis, monitor your cash flow to get a solid understanding of how much capital you have available, how you’re spending it, and how to budget for any upcoming costs. Remember, it’s not just about revenue – your cash flow calculations will reveal how it compares to your expenses and what that really means for your day-to-day business.
If you’re incorporating new programs or ones that have variable costs, like paid social media ads, keep a close eye on their performance. Set benchmarks and check back often to ensure that you’re hitting your goals. By monitoring progress as you go along, you can be more flexible and adjust spend before it’s too late.
Don’t forget to get a big-picture view of your business once in a while. You’ll be able to choose the areas of the business you want to focus more effort on, identify trends as they appear over time, and observe how new projects are impacting your bottom line. At this point, you can work on developing and adjusting your business strategy.
For our breakdown of the top business strategies for small business, head to the SmartBiz Small Business Blog. You’ll find helpful tips, advice, and information designed to empower small business owners like you.
By taking these steps, you can be sure to make the proper deductions on your taxes and have solid documentation backing your claims.
4. Reevaluate your methods
As your business grows, make sure to consider whether your bookkeeping practices should grow or change with it. You might have started with a simple spreadsheet or a totally manual system but are now considering purchasing a software to help you become more efficient.
When these decisions come up, think about the time that goes into your current processes and how much it might be costing your business.
With the right solution, you’ll be focusing more resources on your business instead of spending time organizing various paper documents or working with complicated software to stay on top of your books. Try out different solutions and see which one fits best for your unique situation.
5. Use tools to help you keep track of your goals
With financial documentation readily available, you’ll be prepared to manage and grow your business. To get the most value out of your bookkeeping, it’s important to have a system in place for interpreting what your numbers mean and assessing the financial health of your business.
Especially as you grow and consider applying for outside financing, it’s worth looking at your business from the perspective of a potential lender.
That’s why we’re proud to provide you with SmartBiz Advisor. Based on our partner banks’ key criteria, this free, AI-based, online tool will serve as your Intelligent CFO and help you discover how to get the low-cost funding you deserve. Get started today!