Make your small business bookkeeping a breeze in 2016
By Tess Wicks
It’s a new year and you’ve promised yourself to make it the most productive and organized year yet, right? Okay, we can’t all be “pinterest-mom-organized,” but we can try our darndest. And you know what feels a whole lot better than turning your tupperware cupboard into a stress-free oasis of color-coded bliss?—though, that does sound amazing—It’s getting our bookkeeping in order, before busy time hits and those months of business expenses and client invoices go uncategorized.
Today we’re talking all about best practices you can follow to make your small business bookkeeping a breeze in 2016.
Best Practice #1: Start now with a plan. I’m saying this sternly because it’s in your best interest, I promise. Categorizing 6 months of expenses and tracking down unfulfilled invoices from 3 months ago is NOT fun, nor is it productive. Set up a schedule, put a plan in place, and take consistent action on your bookkeeping and accounting duties.
Best Practice #2: Set up a bank account for your corporation, LLC, or sole-proprietorship, whether it really is a designated business account or you just call it that. Then, have a debit card and credit card linked to that account for business transactions, only. Making purchases on your cards is much easier to track, so I recommend doing that, responsibly of course. All personal expenses should be made on your personal credit and debit cards linked to your personal bank account, no exceptions.
Best Practice #3: Keep track of monthly income and set up expense categories. Make sure you know what income should go into the business account and what expenses should come out of it. Review the IRS code and consult with a professional tax accountant on what type of expenses you can write off. Organize by codes so you can easily reference these categories later. Some tax-deductible expenses may surprise you.
Best Practice #4: Find a good bookkeeping software. Some are more expensive and are also more complex so pick one that you will regularly use. A few good ones are Outright, Xero, or Freshbooks, but you can use whatever you already have or like. Connect your business credit cards and bank accounts. The software will automatically record all your credit card transactions and activity in your bank account, which makes categorizing really simple.
Best Practice #5: Save your receipts. Here’s how I organize them: After a business purchase, I immediately make a note at the top of my receipt with the expense category it should be filed under. I then save my receipts in my wallet, and at the end of the week, transfer the receipts into a small envelope for the month. At the beginning of the next month, when I do my bookkeeping, I compare my receipts with the transactions in my bookkeeping software to make sure everything has been properly categorized and accounted for. I then transfer the receipts from my small monthly envelope into my big tax-year envelope.
Best Practice #6: Save for taxes and pay your quarterlies. Set up a subsavings account labeled “Taxes” and transfer the proper estimated percentage of your income from your business account. Do this with your monthly bookkeeping check. When quarterlies come around, you’ll have already set a good amount aside to make your payment. Read this post for more information on quarterlies. If you have payroll and sales taxes, you’ll want to do additional research and consult with a professional.
Best Practice #7: As a small business owner, you most likely wear many hats every day. If handling the books is bogging you down and just isn’t your thing, consider hiring a professional to help you take care of your business accounting.
There you go, 7 steps to get your bookkeeping on track for 2016. For more insights into managing your finances, visit www.tesswicks.com. If you have any questions, contact Tess Wicks at tesslwicks@gmail.com or @tess_wicks on Twitter and Instagram.