If you own your own business, you have a lot on your plate. You probably have your own system for managing everything, and that might include storing a lot of important information in your own head. While that may work for you most of the time, you are bound to slip up at some point and forget some important information. In order to keep track of all the important financial details involved in running a business, you need to develop a reliable bookkeeping system. Here are 5 tips on bookkeeping for entrepreneurs to help get you started.
1. Plan ahead for big expenses
You will have better control over your finances if you can plan ahead for big expenses as soon as you can anticipate those expenses. This can include expenses like computer upgrades. It can also mean acknowledging and preparing for times when you expect business to be slow and less capital will be coming in. When you are prepared in advance for these expenses, you can budget accordingly. Then you won’t have to scramble at the last minute to find money to cover expenses during a season of low cash flow or try to get a loan to cover a major expense. You also won’t miss out on business opportunities because you are short on cash.
2. Keep track of your expenses
This is important when it comes time to file your taxes; you need to be able to justify expenses that you are writing off for tax purposes. You also don’t want to miss out on claiming a tax-deductible expense because you didn’t keep proper account of those expenses. Don’t estimate your expenses on your tax return; a round number is a tip-off to the IRS that the number is an estimate. You could end up losing credit for the entire category of expenses. A good way to keep track of your expenses is to use a company credit card. Expenses will usually be categorized on your credit card statement. Using a credit card instead of cash means that you don’t have to hold on to piles of receipts every time you spend a few dollars at the office supply store. If you do pay cash, be sure to keep a record of those expenses on paper or in electronic format.
3. Track deposits accurately
Be careful that deposits are not recorded as income, or you could end up paying taxes on money that is not income. Choose a system for recording your deposits, and use it consistently.
4. Budget for tax payments
Throughout the year, set money aside to pay your taxes. Mark tax deadlines on your calendar so that you can file quarterly returns and make payments on time. If tax payments are not made on time, you can end up paying interest and penalties.
5. Pay attention to your invoices
After you issue an invoice, it is important that someone is tracking it to make sure that it has been paid. If invoices are not paid by clients, your cash flow will suffer. Set up a system for dealing with invoices that are unpaid, with actions to occur at the 30, 60, and 90 day marks. This might include adding penalties if invoices are not paid within a certain time frame.
These tips will help you to maintain an organized and accurate bookkeeping system. You can get business, bookkeeping and tax and accounting advice by contacting Acceler8. We help business owners and entrepreneurs to achieve their goals by providing practical business advice. Give Acceler8 a call today.