Chances are the reason you are in business is to make money. After all, your good looks won’t pay the mortgage, and the electric company doesn’t accept coupons. And even if you’re not in it for the loot (like a nonprofit), you still need to keep track of your business funds that are coming in and going out on a daily basis.
If you aren’t consistently tracking your funds, you don’t have the right software in place or you make a math error, it could cost you big time down the road. Avoid headaches at audit time (or tax time) and keep up with your bookkeeping, before it gets out of control. Here are six tips to avoid bookkeeping madness.
- Know which tax boat you are in before you set sail. Are you a sole proprietorship, partnership, corporation, S corporation? Each type of business has its own tax rules and regulations to follow. You may have to pay income tax, sales or excise tax, self-employment tax or employment tax. Figure out which type of business you have and what your tax situation might look like at the beginning of the year so you don’t get stuck with a big bill at tax time.
- Keep good records. You need to carefully track your business expenses and income – and preferably in a software system, not jotted down on the back of a coffeehouse napkin that you’re also using as a bookmark. Scan receipts and back up your files. Some receipts are made to fade out after a certain period of time, so it’s good to have an electronic version of all your receipts.
- Know your accounting method, inside and out. The most common accounting methods are cash and accrual. With cash, you usually report income in the year you receive it and deduct expenses in the year you pay them. If you’re using an accrual method, you report income in the tax year you earned it (even if you haven’t received it) and you deduct expenses in the tax year you incur them (even if you haven’t paid them yet).
- Know what you need to track. You’ll need to keep an eye on all your expense receipts, payroll data, vendor payments and outside invoices to make sure you cover all your bookkeeping bases.
- Find the software that is right for your business. QuickBooks offers many great solutions for your bookkeeping needs. They even offer software options that grow with your business. Find the one that’s right for your business.
- Ask for help when you need it. Sometimes, you just need to call in the cavalry. There’s a reason people dedicate lots of their time to education and training in bookkeeping (so you don’t have to)! Instead of hiring a full-time bookkeeper on your staff, bring in an expert bookkeeper from.
At ATW, we’re not CPAs, but we network with some great accountants and bookkeepers. Reach out to us for a referral. We’d be happy to help.
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