There are numerous good bookkeeping habits every small business owner should practice. As a bookkeeper and small business owner myself, I cannot stress enough to our business clients the importance of being organized, tracking expenses, recording accurate deposits, using separate bank accounts and setting money aside for payroll and sales taxes. While not everyone has the gift of organization, if you are a business owner, it behooves you to adopt the following good habits to assist in keeping your business records and finances organized.
Tracking Expenses
Tracking expenses are going to help you gain a better idea of where your money is going, know exactly how your business is doing on a regular basis and give you the ability to make educated decisions about your business. If you are tracking your expenses regularly, you know how much you have spent and how much more you can spend. For example, you should have a set marketing amount you are willing to spend each calendar year. Keeping track of the amount spent will ensure you do not overspend. In addition, be sure to track receipts, credit card statement transactions, business trips, lunches, and advertising/marketing expenses, as previously mentioned, as well as double-check your bank statements with missed transactions. And remember, your business expenses can be used as deductions on your tax returns and assist you in the event of an audit. Even more, reason to log those receipts!
Recording Accurate Deposits
Recording accurate deposits are imperative to ensure you are paying taxes only on what is actual income to you. Many business owners transfer money between different accounts, and make deposits from loans and cash deposits. Keep a log of only the income you receive so you have a detailed record of your income for an accurate depiction of your business and for your tax preparer.
Separate Bank Accounts and Taxes
Retain separate business and personal bank/credit card accounts. It helps you track business expenses and deposits much easier. I also recommend keeping at least a second business account designated for tax payments. Keeping an account with money in it for sales tax, quarterly payroll reports and your personal or corporate tax return payments will guarantee you will not need to worry about incurring penalties and interest for not filing your sales tax returns and quarterly payroll reports without payments.