Simple Bookkeeping Tips for Small Business Success
If you’ve seen success with your side hustle or just taking off on your own venture, it’s definitely time to start keeping good records! Don’t get caught without documentation at tax time. Besides, good bookkeeping will help you account for your expenses, possibly reduce some of your tax bills, and become better at business planning so your business flourishes in the next years.
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Here are my top tips for bookkeeping that help you manage your cash flow and grow your business.
Always get receipts
Before you do anything as a self-employed worker, you need to make sure you have records to keep in the first place! So, for every business expense, ask for receipts so you can track what you’re spending and you can prove where your money’s going. Besides, getting a tax deduction will reduce your taxable income, so you’ll pay less tax, which can end up being an important saving and a boost for your business.
You aren’t going to need to hand a big box of receipts to your accountant at tax time but the IRS can come back and audit you anytime within 7 years. This is why it’s really important to have good bookkeeping records. Since most everything is online now, the important thing is to document the reason you spent the money where you did.
I personally use GoDaddy Bookkeeping. I’ve used it for many years simply because it integrates seamlessly with eBay. I am able to link all my financial accounts and credit cards to the GoDaddy system, manually enter what the transactions were for and keep a detailed log for my business. I’m confident if the IRS has any questions about my transactions I would be able to answer them.
You can also use a system like Quickbooks for the self-employed but I personally found that more challenging to work with and it didn’t integrate as well with my selling systems.
Instead of a box, you can digitally track your receipts as well. There are several programs allowing you to easily upload your bookkeeping receipts and save them.
- Quickbooks has a feature built into it to scan and add receipts
- Wave Receipts App
- Google Sheets or Excel Spreadsheet
How many times have you started the year resolving to keep track of all your expenses, save your receipts neatly, and not let anything slide? And how many times has that bookkeeping resolution fallen apart by February?
A big reason people don’t keep good bookkeeping is that they just find it too complex. It doesn’t have to be.
Here’s how to keep organized when it comes to business receipts and expenses:
- Keep all your work-related paperwork in one place (preferably where you work, so a drawer in your work desk or a binder)
- File receipts as soon as you incur an expense or schedule a weekly day and time to enter them
- Keep an Excel spreadsheet of receipts with the date, reason, and amount spent
- Do the same for your invoices, if you raise any: keep a record, and file them right away in a binder where you work
- Do a quarterly round-up: set a reminder in your calendar to go through everything and check you’ve got it all accounted for once every 3 months – that way, the pile of paperwork won’t be insurmountable at the end of the year!
- Once you get organized, find ways to save money in your business with my help
Think differently when it comes to bookkeeping
When it comes to expenses, many of us tend to disregard a large amount of money we spend on our business. That money, if you keep good records of it, can earn you tax breaks.
All you need to do is think about the impact of your purchases and how they influence your business workings.
For example, a binder for your receipts is a business expense. In the long run, it cuts down on your admin time, making you more productive so you can work and earn more. It also helps you be completely auditable if the need arises. And the miles you drive to get that binder are also a business expense (you wouldn’t have gone to get the binder if it weren’t for your business, right?).
Spending the time to meet with a CERTIFIED Accountant to go over all the benefits of being self-employed BEFORE tax time can save you a lot of money and time! The reason I bold and capitalized CERTIFIED is that there are plenty of people on the internet who think they are qualified to give tax advice when the reality is our situations are all completely different depending on our finances.
While it is true, office expenses are office expenses and we can document and write those off the same, the financial implications of taxes should only be reviewed and explained to you by someone who can back that up FOR you at tax time. Unfortunately, the IRS isn’t going to consider Cindy Lou from YouTube to be a credible source during an audit!
Separate work and personal bookkeeping
When you first start out, it doesn’t make much sense to have a separate bank account for your business, especially if you work in a field where you’re not buying lots of supplies (e.g. freelance writing or coaching). However, all your expenses will soon add up if you don’t keep track, and the best way to keep them in hand is by opening a separate bank account for everything related to your business. This way, you’ll track your outgoings more easily and you’ll be able to judge whether your business is doing well, too.
The biggest mistake I make when I first started growing my reselling business was combining my inventory purchases on our personal credit card. What a nightmare that was at tax time! I spent a MONTH combing through all of the expenses, getting everything documented correctly. The following year I opened a business banking account to keep everything separate for my bookkeeping. While I didn’t qualify for a business credit card at the time, I simply used one of our personal credit cards ONLY for business expenses. Then, I was able to keep them completely separate.
The other important aspect of this separation is that it will allow you to be ready for an IRS audit. You don’t want to be plowing through tons of personal expenses and justifying why an item is for your business and another one isn’t. Keep bookkeeping clean with completely separate bank accounts and credit cards.
Always have a bookkeeping back-up
Whether you choose to back up your files and receipts in a cloud or on an old-fashioned hard drive disk, don’t leave this to chance. Computers do and will crash and you’re carefully kept bookkeeping will vanish. Invest in a good system that works for you and stay consistent, saving often and keeping time labels on your back-ups if needed.
With these small but useful tips, you are now a little closer to good bookkeeping, which is essential for any side hustler or self-employed person. Let me know in the comments if you have some more tips of your own!
The reality is doing the work upfront and setting up systems in the first place is the absolute key to success in a small business. If your records and bookkeeping are a mess from the beginning, it will be impossible to get loans, do your taxes, see how profitable your business really is and accomplish the long-term goals you set for yourself. Do yourself a favor and take the time to learn from these mistakes I made!
Until Next Time,
Bexa Boss Lady