As a business owner, it may be difficult to find time to sit and update records of sales, purchases, and inventory on a regular basis. Bookkeeping may be a tedious part of entrepreneurship, but ultimately it makes it easier to track your business’ performance and your money. These five basic bookkeeping tips should help you get on your way.
- Plan ahead for likely major expenses such as equipment purchases or computer upgrades. For large-scale tasks such as these try to plan up to five years ahead so that you are less tempted to take money out of the company when things seem to be going well. If you have these eventualities listed down and are preparing for them, it might not be necessary to go the route of taking out a loan to handle them.
- Track your expenses so you are less likely to miss or lose out on tax write-offs. Get a credit card that is dedicated solely to the business. Always using this card for business expenses means you won’t have to worry about lost receipts and forfeiting tax-time write-offs since most card statements will categorize expenses so you can easily spot which ones correlate with which business activities. Equally important is tracking cash expenses related to business trips, lunches, and other occasions. This proves very helpful in the event of an audit if you need to substantiate those items for your tax records.
- Ensure that bank deposits are recorded correctly or you may find you are paying tax on money that is not income. This can happen if you use a single bank account into which you deposit not just revenue from sales, but loan payments or maybe cash from personal savings used to shore up the business. Keeping this record up-to-date might prevent you or anyone else doing your books, from mistakenly recording a deposit as income when in fact it was not.
- Set aside money for paying taxes then make a note (not just mentally) of when they are due. Some businesses use employee withholdings to help them get through rough patches and then find they are in double jeopardy – they have not paid over payroll taxes that were due and they have used up what the IRS perceives as employee funds (a situation that the IRS does not tend to take lightly). Noteworthy too, is to consider having a professional bookkeeper, with access to a bookkeeping merchant account, do your taxes.
- Your receivables should be received in a timely fashion, as a late or unpaid bill is tantamount to you issuing an interest-free loan. One way around having a stack of overdue payments from your customers is to have someone in the organization specifically assigned to track customer payments and call customers as a reminder. Consider putting in place an extra charge for payments that are 30, 60, or 90 days past due.
Doing the books may not be the most exciting part of entrepreneurship, but it can be the difference between a business destined to fail and one that soars beyond your expectations.
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