It is a well-known fact that most small businesses fail, many in the first year. The main reason they fail is they lose money. Unless you’re a billion dollar venture-funded corporation, you won’t survive long losing money.
If you own a small business and want to succeed, you owe it to yourself to pay attention to the numbers. Much can be gleaned from the financials. But if you didn’t major in accounting then your statements may as well have been written by an alien.
Hopefully this was helpful to you with some ideas to simplify your bookkeeping. For most small businesses, it is a good investment to delegate your taxes to a CPA that specializes in small businesses and outsource your bookkeeping to a professional bookkeeper.
If you would like to contact me about handling your bookkeeping for you, please click the button below to get in touch with me and I will schedule a call with you to discuss further.
There are numbers people and there are those that would rather step on glass than look at numbers.
Score.org listed bookkeeping as the #1 source of pain for small business owners.
Anyone who is in pain knows you just want to get rid of it and prevent it from ever happening again...if possible.
I've put together my top ten tips for making bookkeeping easier. These are tips that the small business owner can do themselves or outsource to a bookkeeper or CPA.
Automate - What some people find boring and tedious, others find comfortable and calming. Much of tediousness is due to manual processes that can now be eliminated with modern technology.
Manual entries can be replaced with bank feeds, automatic uploads of payroll entries, recurring entries, electronic payments...
If you’re still doing your bookkeeping with a lot of manual entries, you owe it to yourself to investigate switching over to an application like QuickBooks Online or have a bookkeeper/CPA help you implement systems to save you time and headaches. Eliminating manual entries also cuts down on the chance for data entry errors.
Outsource Your Bookkeeping - Are you thinking that you just don’t have the time or interest to do your bookkeeping yourself?
Then strongly consider outsourcing it to a bookkeeper or CPA. Usually, a CPA is going to charge you more, but you can certainly price shop.
With technology the way it is today, you don’t even need to hire someone in your hometown. You can hire a bookkeeper from anywhere in the world. By keeping your books in the cloud, you can access them from your computer at the same time your CPA or bookkeeper are working on them and they will be backed up.
Review Financials Monthly - You may dread having to set up a monthly appointment in your schedule to go over your books, but when you do so, you stay on top of the financial side of your business and you save yourself from the daunting task of having to look at your numbers only at tax time or yearend.
By reviewing the financials monthly, you can become aware of a new trend (good or bad) and react quickly.
Keep Personal and Business Separated - Not only does commingling your finances make your bookkeeping more difficult, but it makes your business look amateur.
If you’re ever audited by the IRS, having your bank accounts being used for both business and personal items will make it look like you’re not serious with your business. In some cases, the IRS can think your business is just a hobby.
Keep your business bank accounts and credit cards for business items only. Use things like salary or draws to take money out of your business and use that money for personal items in a separate account or credit card(s).
Put Aside Money for Taxes, Payroll, Profit - The last thing you want to do is have it come time to pay your taxes and you don’t have any money to pay for them.
Set up a separate bank account for taxes and transfer money to this account every month for your estimated taxes. Do the same for payroll and set aside some for profit as well. This will force you to watch your spending.
Documentation - Business expenses are costs incurred in the ordinary course of business. These are deductible, but you need to be able to back those amounts up with supporting documentation, such as invoices, receipts, payroll documents...
This can be tedious and it helps to automate this. If you use financial software like Quickbooks Online, you can attach these documents directly to your expenses electronically, where they are backed up in the cloud and always available.
You can use applications, like Hubdoc, to pull these documents for you and match them up to your bank feeds.
Compare Actual Expenses to Budgeted Amounts - Budgets bring up bad feelings as they can be difficult to prepare and adhere to.
But the main point of them is to change behavior. By doing a comparison of actual amounts to a budgeted amount, you can quickly see if you are overspending in an area.
You don’t need to worry about the categories where you over a small amount. Just focus on those that are way over budget.
It also helps to look at those that are way under budget. If your rent expense is under budget, you may have forgotten to pay this month’s rent. Or if office supplies are way under budget, are you going to have a huge bill coming up that you need to be aware of?
Money Tied Up in AR or Inventory - Answer this question. Where would you rather have your cash? In a bank account? Or in a product on a shelf in the warehouse? Or in your customer’s bank account?
Accounts receivable and inventory are typical sink holes for a business’ cash. The faster you can turn these amounts into cash, the better for you. Review these amounts monthly and look for old items that need your effort or should be written off.
Deadlines - Being late to the dentist is one thing, but missing your tax filing or payroll can land you in serious trouble.
Know your important deadlines and adhere to those schedules strictly. Need help in those areas? Hire or outsource this to a competent bookkeeper or CPA.
Know Your Cash Flow - Cash is king, but one of the least used financial statements is the Statement of Cash Flows.
If you knew your cash declined during the month of June, would you know off the top of your head where that decrease came from? Probably not.
There are usually too many transactions involving cash to weed through. Using the Statement of Cash Flows, you can quickly see where cash was generated and where it was used.
If you’re not familiar with this statement, be sure to have you bookkeeper or CPA show it to you and how to use it.
By following these ten tips, it will make your bookkeeping less stressful and easier as time goes by. I know what you’re saying, “these are not easy to implement and I don’t have time to do them.” For most small business owners the answer is to delegate those tasks to someone who is competent, so they can focus on running their business, increasing sales, satisfying customers…
If you’re interested in having me handle these tasks for you, press the button below to contact me. We can talk about your business and determine if we are a good fit for each other. For as little as a few hundred dollars a month, you can have a professional bookkeeper process your finances for you and take all that worry and time away from you.