Most small business owners hate bookkeeping. Some see it as a time consuming task that takes away from running their business; for others, it brings an avalanche of nerves (I regularly have nightmares about the IRS). As a small business owner, it’s your job to make sure your company’s money gets managed correctly.
Successful entrepreneurs don’t view bookkeeping as an inherently negative thing. Rather, an obligation that needs to be handled with care. Even if you hate this aspect of running a business, you can apply basic procedures to stay on top of the paperwork. By doing so, you will save time, money, and a lot of stress.
Here are a few basic tips to gain control – and stay in control – of accounting tasks:
- Plan for major expenses – Nothing is worse than scrambling for a loan or making impromptu cuts when expenses become unavoidable. It is important to acknowledge seasonal ups and downs and be prepared for when the cash flow slows. If you can, put major events – such as hardware upgrades – on a calendar a year in advance, visualizing large expenses will help you save.
- Get organized – Effective bookkeeping requires accurate records. Spend some time thinking about your work habits and your company’s workflow. Create a designated folder for storing receipts and other information and set aside time each week to update your books. Use a readily accessible in-basket for employees to turn in receipts and paid invoices.
- Record deposits correctly – Adopt a system for keeping financial activities straight. Business owners regularly make a variety of deposits throughout the year (loans, revenue from sales, cash infusions from personal savings), it is common to erroneously record some deposits as income, and as consequence pay taxes on more money than you’ve actually made.
- Set aside money for paying taxes – Systematically set a portion of cash aside throughout the year specifically for paying company taxes. As we are all aware, the IRS can levy heavy penalties and interest for not filing returns on time.
- Go paperless – Storing tax documents for six years is a hassle, storing physical, individual pieces of tax documents for six years is a major hassle. Adopt a paperless solution: more organized, less wasteful, more secure. Another option is to purchase a small fireproof safe to store important personal documents (passport, life insurance, etc.) along with a regular backup of your bookkeeping software and tax returns saved on a flash drive. For extra data protection, consider offsite physical storage or online data storage for these records and scanned files.