4 Bookkeeping Tips for Small Business Owners

As a small business owner, you have a lot to think about. From developing a marketing plan to determining how you’ll price your goods or services, there is much to do. But don’t let a long list of action items prevent you from taking care of one of your most critical responsibilities: bookkeeping. This is the practice of monitoring your company’s financial activity.

Many small business owners don’t feel confident in their ability to maintain good financial records. Or they might avoid doing so because they don’t think it’s necessary while they’re still in the startup phase. Unfortunately, putting off basic bookkeeping responsibilities can make your company less likely to thrive.

If you don’t do basic bookkeeping, you won’t have a clear understanding of your expenses, profits, and revenue. You may also struggle to pay bills on time and prepare for tax season if you’re not keeping good fiscal records. Here are four bookkeeping tips for small business owners who need help staying on top of their finances.

1. Consider Hiring a Professional
   If the idea of handling your company’s books stresses you out, it might be best to contact a trusted professional. Otherwise, you could end up doing things wrong and making a mess of your books. If there’s one area of your business that absolutely needs to be accurate, it’s bookkeeping.

   Even if you’re good with numbers and comfortable handling your own finances, offloading this time-consuming responsibility may still be wise. It could give you time to focus on other aspects of your business. Perhaps your advertising efforts are falling flat and you want more time to revamp your marketing strategy. Or maybe you need to free up more time to source raw materials for a new product you’re developing.

   Unfortunately, not all small businesses can afford to hire a full-time bookkeeper. If you’re in that boat and trying to save money by doing your own bookkeeping, don’t worry! You can find user-friendly bookkeeping software that makes it easier to keep your financial records organized and accurate.

2. Choose a Bookkeeping Method
   Single-entry and double-entry are the two primary bookkeeping methods businesses use to keep their financial records organized. There’s no single “right” way to keep your books. However, you may find that one of these methods works better for your needs than the other. It’s also perfectly fine to start with one method and switch to the other as your business grows.

   Single-entry processes involve making just one financial entry for every transaction your business makes. This is similar to how you record transactions in a check register. You record each transaction on a single line, indicating whether it’s a positive or a negative amount. This method is simple but limited in its scope. It may work for startups, but it’s not the best method for larger companies that need to track accounts payable, inventory, and other complex accounts.

   Double-entry bookkeeping processes are often better for large businesses because they reveal more information about each transaction. In a double-entry system, you record every business transaction as a debit in one account and a credit in another. The debits and credits must always match to ensure your bookkeeping is error-free. A double-entry system may be more complicated to maintain, but it can help you spot accounting errors or fraud if your entries don’t match. Single-entry systems don’t have this failsafe and may therefore be more vulnerable to errors and fraud.

3. Schedule Regular Bookkeeping “Appointments”
   If you’re the type of person who postpones unpleasantries, you may never get around to keeping your books. Most people don’t enjoy monitoring the health of their finances, but it’s still something that must be done. So, how do you avoid postponing this essential responsibility? Try scheduling regular bookkeeping “appointments.”

   Most business owners who schedule meetings with vendors, clients, or colleagues do everything they can to keep their commitments. You should do the same when you schedule meetings with yourself. Many people find that regularly planning book-balancing meetings makes it easier to take care of this less-than-thrilling responsibility.

   One easy practice is to reserve a couple of hours at the end of each month to review that month’s transactions. Most small business owners can do this in two hours or less as long as they do it every month. If you wait too long, transactions will pile up and you’ll have to dedicate more time to your bookkeeping efforts.

4. Plan Ahead for Tax Season
   Tax season is stressful for everyone, but it can be especially nerve-wracking for small business owners. Fortunately, you can make it through smoothly as long as you begin preparing in advance. It’s always better to have your books in order early rather than rushing to meet last-minute deadlines.

   Keeping accurate records throughout the year is the best way to make tax season as headache-free as possible. That includes recording every business transaction — including those that seem minor. Don’t forget to reimburse yourself for any small business expenses you paid on your personal credit or debit cards. Failing to record all transactions could result in overreporting or underreporting your taxable income.

Next, clean up your payable and receivable invoices as needed before tax season arrives. This might mean removing an invoice from your books that you thought you had to pay but didn’t end up needing to. Or you may need to adjust a receivable invoice a customer never paid you to a bad debt expense. Finally, tie out the numbers on your balance sheet to make sure everything matches up. If you do these things, everything will go much smoother for you when tax season rolls around.

Bookkeeping is not a favorite activity for most small business owners. But even though it can be dull and time-consuming work, it’s essential for monitoring and improving your financial health. Use these bookkeeping tips to help you keep better records and simplify your life.

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