Running your own business can be an exceptionally rewarding — but tough — process. However, running a business of any size is simply unimaginable without a reliable system. If you have solid financial records, you'll be able to streamline the management of debts, deposits, as well as any items you've sold on credit.
In contrast, failing to have solid bookkeeping practices for your small business can push your business into bankruptcy before you know it. Let's take a closer look at a few of the best bookkeeping practices for small businesses you can implement today.
Keep Your Business And Personal Expenses Separate
When running your own business, it can be simple to get your personal expenses and business expenses mixed together. Without separating your business expenses, you will find that keeping track of profits can become very difficult to do. Creating a separate bank account for your business and using business credit cards will be a great way to keep your personal and business expenses separate.
Prepare Yourself For Major Expenses
In any business, major expenses will come up from time to time. Whether you need new equipment or are moving into a new location, it's a sound bookkeeping practice to plan and save for any unexpected major expenses. Even if you don't think you'll encounter these expenses, you should still plan for your tax liability throughout the year.
You can simply put money aside each month that you can earmark for taxes or other major expenses. If you are saving a small amount of money each month, you won't be taken by surprise when you are hit with one of these major expenses.
Don't Be Afraid To Hire Professionals
If you're like most business owners, managing the books isn't at the top of your list of desirable activities. However, if you don't have a firm grasp on bookkeeping, it might be a good idea to hire a professional.
Having an accountant on your side will give you a professional perspective on your business finances. In addition to providing a range of different bookkeeping services, you'll find your professional accountant to be especially useful during tax season. You can optimize this relationship by keeping the channels of communication open with your accountant throughout the year.
Have A Digital Payroll
Getting rid of all the paperwork that comes along with paying and processing payroll may be the boost your business needs. With payroll software, you can quickly and easily manage payroll information and even create various reports.
Access to this on-demand information can empower you to make better decisions based on relevant data and insights. Most importantly, digital payroll can streamline the process communicating records with your accountant.
Keep Strict Records Of Your Inventory
With strict records of your inventory, you can track profits and potential thefts much more easily. Better organization of your inventory can help you to avoid misplacing merchandise as well as help you keep a better handle on product shrink. If you're running an online business, it is especially important to make sure your online inventory matches your actual physical inventory.
Take Advantage Of Small Business Deductions
As a business owner, there are several small business deductions you can take advantage of. Even if you work from home or are a freelancer, you may be eligible to cash in on home office depreciation. These write-offs can be used to lower your overall tax liability when tax season finally comes.
Business lunches, miles on your work vehicle, and new supplies for your office are all examples of purchases that you may otherwise forget about writing off if you aren't on top of your bookkeeping.
Remember To Follow Up On Your Invoices
Just because you are sending invoices out doesn't mean you're actually receiving money for the bills. It is important to follow up on your invoices if they haven't been paid by the agreed date. In any case, you should make time to review your books on a regular basis. By doing so, you can effectively manage your cash flow, stay up to date on invoices, and get to know your expenses.
Contact John F. Dennehy Jr., CPA
At John F. Dennehy Jr. CPA, we pride ourselves in delivering professional accounting solutions for businesses across a range of industries. When you partner with John F. Dennehy, we'll focus on the financials, so you can focus on growing your business and achieving your goals.
Contact John F. Dennehy Jr. CPA today.