Your small business bookkeeping can make or break your company. Poor bookkeeping could cost you thousands of dollars or even get you in trouble with the IRS.
Depending on your business, you may end up doing the bookkeeping yourself. USA Today estimates a professional in-house bookkeeper costs around $40,000 per year. That’s well beyond the budget of most businesses.
You can opt to hire part-time employees or use software programs instead. These options can still be expensive. With these choices, you also have to worry about consistency and accuracy.
Read on to learn more about bookkeeping basics on a budget. You will also find 4 fantastic bookkeeping tips and tricks to save time and money.
Small Business Bookkeeping Basics
The terms bookkeeping and accounting are often times confused. Chron Small Business says bookkeepers are responsible for recording financial transactions. Accountants interpret, classify, analyze, report and summarize financial data.
Bookkeepers need fewer credentials and education than accountants so they cost less. Anyone can learn bookkeeping with a little time and practice.
That’s why so many small business owners and managers handle their own books. Handling your own bookkeeping can work. But you need to do it right.
1. Get Organized
Organized record keeping is essential for proper bookkeeping efficiency. You should always keep all physical and digital receipts and transactions.
Don’t throw your printed papers and receipts in a drawer or closet. Don’t scan or download files without labels or folders. Create a basic filing system and stick to it.
Track your financial transactions in a spreadsheet or use affordable programs like Quickbooks.
Always make sure to track:
- Tax payments due
- Accounts payable
- Accounts receivable
- Legal fees
- Miscellaneous overhead
Also, organize the contact information for any financial management resources you may have. These resources could include:
- Credit union
- Credit card company
You’re more likely to ask for help and avoid errors if you have their contact information handy at all times.
Getting organized saves time and reduces fees. It also helps you to prevent mixing personal and business expenses.
2. Don’t Mix Personal and Business Transactions
Mixing personal and business finance is a very most common bookkeeping issue. The Balance Small Business says it could cost you valuable tax deductions too.
Most people mix business and personal accounts in an attempt to save money one way or another. You will have to spend time and money on accountants, lawyers or the IRS to correct these issues. That will more than cancel out any money you saved.
You could even lose your company’s liability protection. Commingling accounts could backfire if you face legal action.
Your personal assets could end up on the line. That’s not a risk worth taking.
It’s also an immoral practice and can only damage your company.
3. Generate Your Own Pay Stubs
Pay stubs attach to paychecks issued to yourself or your employees. It includes payment amount, taxes, deductions, retirement accounts, and other annual data.
They are usually created by payroll companies or financial services corporations.
Payroll software or professional financial service providers can be expensive. Full-service companies like ADP and Paychex are great. But they aren’t always affordable for a startup on a shoe-string budget.
A great way to save your company money is to cut out the middleman and generate your own pay stubs. Try using a pay stub maker to get the job done.
It will save you time and money. And we all know that time is money!
4. Find Small Business Tax Deductions
Running a small business gets expensive even when you are as thrifty. Luckily there are also plenty of small business tax deductions.
Tax deductions for small businesses can save you a fortune. Educate yourself on these possible breaks as much as you can.
There are plenty of money-saving opportunities out there. Some of the top small business tax deductions include:
- Travel expenses
- Asset depreciation
- Rent and utilities
- Home office
- Mortgage interest
There are some gray areas. Speak to a tax professional before claiming any questionable small business tax breaks.
Save Your Dollars on Bookkeeping
Smart small business bookkeeping can be an asset to your company and not a liability.
Read our other helpful financial guides to help you manage your taxes and finances. We also have plenty of articles on small business accounting tips.
Be knowledgeable and organized to save your dollars on bookkeeping!