Maintaining accurate and organized financial records is vital for any small business. At Gleason Tax Advisory, we emphasize the importance of being organized, tracking expenses diligently, recording deposits accurately, separating business and personal bank accounts, and setting money aside for payroll and sales taxes. Below are a few fundamental practices that can help you keep your business finances on track:
Track Your Expenses
Regularly tracking your expenses is the best way to understand where your money is going. This routine not only provides a clear snapshot of your business’s financial health but also empowers you to make informed decisions. For instance, if you set a specific annual budget for marketing, knowing how much you’ve already spent will help prevent overspending. Whether it’s a business lunch, advertising cost, or a purchase on your business credit card, log every transaction and cross-verify it with your bank statements. Keep your receipts, as legitimate business expenses can often be used as deductions at tax time—and could serve as crucial documentation in case of an audit.
Record Accurate Deposits
Accurate deposit recording ensures you only pay taxes on your actual income. This point is especially important if you frequently move money between multiple accounts or if you’ve taken out loans. Keep a detailed log of what constitutes true income versus transfers or loan deposits. Doing so will provide a more realistic picture of your business earnings and save your tax preparer (and you) a lot of hassle when tax season arrives.
Use Separate Bank Accounts and Plan for Taxes
It’s vital to keep business and personal finances separate. Not only does having a dedicated business account help you monitor revenue and expenses more effectively, but it also streamlines the process when it’s time to file taxes. Consider opening a second business account specifically for tax payments. Having a reserve for sales tax and quarterly payroll reports ensures you’ll be ready when those filings are due. This small step can prevent penalties and additional interest charges.
Building good bookkeeping habits may seem daunting at first, but it pays off in the long run. By adopting these practices—tracking expenses, recording deposits accurately, separating personal and business finances, and staying on top of taxes—you’ll be better prepared to make smart business decisions, avoid costly mistakes, and maintain a healthy bottom line.