Most small business owners we come in contact with do not like the paper work side of running a business. They are very good at building houses, fixing vehicles, landscaping, or whatever the specialty is, but paperwork is often the last thing they want to do and /or they just do not have the time. They often do not realize what a benefit it would be to their business if they had up-to-date and accurate financial information available to help in business decisions and just to see how they are doing.
Here are some tips to help keep your books in order and up-to-date:
- Keep it Separate – You should have a separate bank account and credit card(s) just for the business AND use them for just business expenses. When you use these accounts for personal expenses, it becomes much more difficult to separate items when it comes time to prepare your tax returns, you do not have an accurate running account of business costs, and the IRS frowns deeply upon this practice. If your returns were picked for an audit, the IRS could give you a very bad time.
- Schedule a time – actually enter it into your appointment calendar to set aside some time every week for doing paperwork and organize your finances. You can then make informed financial decisions and you will be ready for tax filings deadlines.
- Employees make your business run – you have successfully grown your business and now cannot do it alone. Labor is often the biggest expense a small business has. You have to make sure you are keeping track of the costs of wages, benefits, overtime, payroll taxes and payroll reporting and making accurate payments to the IRS for payroll taxes. Accurate recording of labor cost will allow you to track if you are over-spending on labor costs or if you can give incentives or bonuses to employees to help market your business.
- Are you getting paid? – Keep an accurate running balance of customers/clients who owe you money. Knowing each month who has outstanding invoices can enable you to do follow up calls. By knowing who is perpetually late paying, you can put policies in place to have those pre-pay or require a retainer up front.
- Call in a Professional – CPA’s can be trusted allies in running your small business. They actually like to “keep books” and have the expertise to do it correctly. A CPA will find allowable deductions you may have not thought of and will keep you timely and penalty –free in filing reports. You may think you cannot afford a CPA, but they will save you from headaches and stress and it may be more cost effective than you think.
Some things to consider as another year comes to a close and you are faced with a year’s worth of receipts/deposit slips and invoices stacked up somewhere waiting for you to get to.
