If you’re a small business owner, you have a lot on your plate and adding bookkeeping to that plate can be a recipe for disaster. Luckily, there are many options available now to keep your books up to date without spending hours slaving over your books. Here are our top five tips to keeping your books straight:
- Track your income and expenses. This may seem like a no brainer, but it can be more challenging than you’d think for busy small business owners. You don’t need to pay for expensive bookkeeping software or hire an accountant/bookkeeper if you aren’t ready to. All you have to do is keep track of the money coming in and money going out. How do you do that? With a spreadsheet. That’s right, all you need is an Excel file, Google spreadsheet, or some other way to enter/tally up the expenses. We’d suggest starting with the categories on a tax return, and fitting your expenses into those first: advertising, travel, meals, office expenses, rent, etc. Those will get you started, and your tax pro can give you tips on how else to categorize them if needed. If you don’t like the idea of a spreadsheet, then keeping (organized and neat) envelopes of receipts *may* be another option, but we suggest keeping all receipts/invoices in case of an audit, anyways.
- Do not comingle your business and personal expenses. Keep your business bank account clean of personal expenses. In case of an audit, it will be really difficult to argue the legitimacy of actual business expenses if there are too many personal expenses going out of your business account.
- Keep your records for at least 7 years. This is the amount of time the IRS has to review previous years of tax records for an audit, although they *can* go back further if fraud is suspected.
- Try to stay current with your bookkeeping. You don’t have to do it every day, but weekly or monthly is best practice. This way, if you ever want to review your numbers for business decisions such as financing, purchasing equipment, hiring employees, etc. you won’t have to scramble to get it all done. Tackling a mole hill is way easier than climbing a mountain.
- Know when it’s time to bring in a professional. Recognizing if/when you’re in over your head, too overwhelmed, or just not good at keeping track of your books is the first step to getting them organized. You may not need to hire someone for the first few years, but when you’re ready to spend less time on your books and more time with your clients or on the job site, a professional can help you clear your plate and make room to actually work on growing your business.
At Havig Tax & Consulting, we’re passionate about helping our clients grow their businesses and save money on taxes. If you’d like to discuss ways we can help, we’d be happy to hear from you!