10 Essential Bookkeeping Tips for Small Business Owners
At YSEDC, we know you want your business to succeed: to grow and thrive even during uncertain economic times. To make this happen, you need a knowledgeable team who can guide you and provide the tools and resources to take your business to the next level. We know owning a business, particularly a small one, presents many challenges. Among them is managing your financials and staying on top of vendors, receipts, and expenses. This blog shares ten bookkeeping practices that all small businesses should adopt.
1. Keep personal and business income and purchases separate.
The general rule is to clearly separate your business and personal funds. Occasionally, using the corporate card for personal expenses or your personal account for business is okay. Still, someone in your organization should properly record these adjustments in your accounting software, such as Quickbooks, Sage, or Xero.
2. Establish internal controls.
If certain aspects of your business finances are entrusted to your employees, ensure that there are internal controls in place, such as dual control of processes that involve receiving or distributing funds. As an example, the employee signing checks should not be reconciling accounts or processing the accounts payables. It is also a great idea to have two signers on the check.
3. Stay current with automatic bank downloads.
Automatic transaction downloads are a feature of most accounting software. While it makes things easier and more convenient, be careful not to let those transactions pile up. It is our recommendation to classify bank downloads weekly or monthly to prevent the accumulation of these transactions.
4. Reconcile your bank accounts.
When monitoring your business cash balances, you may compare the register in the accounting software to your bank balance. We recommend reconciling your bank statement(s) at least once a month so you can timely catch any duplications, circular reference transfers (to and from the same account), or other abnormalities.
5. Review your financial reports.
Income Statements (Profit & Loss Statements) and Balance Sheets should be reviewed monthly. Most software offers the option of comparing different periods to analyze trends better. There are numerous other reports, such as payables and receivables (if applicable) that will help you keep an eye on the health of your business.
6. Keep detailed payable and receivable records.
If you use the payables and receivables features in your accounting software, be sure they are accurate. In addition to electronic records, keep all receivable and payable hard copy original records. Also referred to as source documents, hard copy documents can be invaluable if there is a question about an invoice, especially when filing taxes or conducting an audit.
7. Back up your accounting software.
This is not an issue if you have a cloud-based accounting solution like Quickbooks Online or Xero. However, if you have desktop software, ensure this data is backed up regularly to prevent data loss. Also, always ensure you have the most recent version to keep the software working at its highest performance.
8. Obtain form W9 from your contractors and temporary workers.
Form W9 contains basic data for your vendors, such as name, address, tax ID number, or social security number, making preparing 1099Misc or 1099NEC forms each year more efficient. Gathering this information before processing their payment will save you a tremendous amount of time at the beginning of the year.
9. Review payroll, labor law updates, and tax notices as they come in.
In an ever-changing world, reviewing all updated Labor Laws, tax breaks, deadlines, and updates as soon as you receive the information is essential. Putting them off until the end of the year can cause tax penalties, fines, and back-due taxes if your information is not current.
10. Meet with tax professionals regularly for tax planning.
Your accountant or CPA can help review your business goals and ensure you have the correct processes and internal controls. Meeting with your tax professional regularly and following the tips above to keep accurate, up-to-date books and financials will help you save time and money.
At YSEDC, we want to see your business succeed and reach its full potential. But we know how daunting bookkeeping and financial management can be for a small business owner like you. That's why we're here. Let us be your partner and guide. With decades of experience advising and helping businesses, we can provide the expertise and perspective you need to optimize your finances. We can assess your current bookkeeping practices and make tailored recommendations for improvements. We can connect you with our network of trusted accounting professionals to find the right solutions for your needs. We can answer your questions and arm you with knowledge to make informed financial decisions.
You don't have to figure it all out alone. Lean on us. With YSEDC as your consultant, you can focus on your true passion - running your thriving business. We're here to steer you towards financial best practices so you can realize your dreams. Reach out today, and let's talk about how we can help chart your path to success.