As a small business owner, it’s essential that you take a look at your small business finances. Here are my top 10 Bookkeeping Service tips to help you understand how small business bookkeeping service information can improve the success of your small business.
Why Bookkeeping Service is so important?
Bookkeeping Service isn’t just a necessary evil. An accurate and reliable Bookkeeping Service system is extremely important. 20 per cent of new small businesses fail within the first year and 50 per cent within the first five years. Expert’s researchers believe that a key factor in small business survival is the owner’s financial literacy, including knowledge of Bookkeeping Service software. You don’t have to do your own bookkeeping, but you should know how to organize your small business to make it more efficient and accurate.
How do you set up your small business?
Most of my Bookkeeping Service advice has less to do with the Bookkeeping Service system itself and more to do with how you run your small business. Good Bookkeeping Service relies on bank and credit card statements, not boxes of invoices and receipts. An accountant records all transactions on your bank and credit card accounts and reconciles them to your bank statements. This reconciliation ensures that all transactions are recorded with the correct amounts.
The golden rule of Bookkeeping Service:
- All small business transactions, not personal transactions, must be made to a small business bank or credit card account.
- This golden rule may seem simple, but many small business owners go to great lengths to follow it. The following tips will help you follow this golden rule.
Separate your small business life from your personal life
This is a repeat of the golden rule above. Unfortunately, this is one of the most commonly broken rules. Even if you are self-employed or a sole proprietor, it is advisable to keep your bank accounts and credit cards separate for small business purposes only.
By removing all personal transactions from your small business accounts, you can greatly reduce the number of transactions your accountant has to sort through and reconcile. I have personally kept the books for a number of small businesses and more than half of the transactions in the “small business accounts” were personal in nature. Categorizing personal transactions can be time-consuming, costly and error-prone.
- Owners should pay themselves a fair wage and be paid by the payroll system in the same manner as any other employee. However, freelancers, freelancers and partners are also encouraged to pay themselves a “salary”, even if it is strictly a “deduction” and does not show up on their paycheck.
- Paying yourself a salary reinforces the idea that your firm is an independent entity and reduces the need to go against the “golden rule” of having your personal expenses paid directly by the firm. Instead of the company making several transactions a month on your behalf, it will send you a check each month and deposit it in a separate account for your personal expenses
Small business expenses
Despite your best efforts, you may end up using your personal funds to pay small business expenses. Remember that these small business expenses must be reported in your small business account according to the Golden Rule. Ask the company to write you a check to reimburse you for expenses paid with personal funds. This check will be issued separately from your monthly paycheck.
The reimbursement procedure should be the same as for an employee. Record the date, vendor and purpose of the expense on the worksheet and attach a receipt. Your company will then issue a check for the exact amount. This is a bit tedious, but it allows your accountant to deduct these expenses as they are paid by check from your company account.
Small business mileage
- Your company can deduct all small business miles driven in your personal vehicle at the standard mileage rate (56 cents in 2021). QuickBooks Online allows you to automatically record your mileage using your smartphone’s GPS, which is much easier than recording it manually.
- The company does not have to pay you directly for your personal vehicle, including fuel used solely for small business purposes. The 56 cents per mile you receive from the company should be used to pay for fuel and repairs.
Bookkeeping Service receipts
Although the Bookkeeping Service system does not rely on receipts to identify transactions, the IRS requires receipts for all tax deductions. The traditional method of storing receipts is to create a file for paper receipts from each vendor. A newer method is to scan the receipts and attach an electronic copy of the receipt to the transaction in your Bookkeeping Service software. This is a great feature that many Bookkeeping Service software packages offer for free.
According to a study by Wasp Barcode Technologies, 50% of small businesses outsource their payroll. We recommend that you do the same. Payroll, employee income tax collection and tax reporting can be tedious processes, but they can be easily outsourced at a reasonable cost. Many payroll service providers integrate with Bookkeeping Service software and can automatically upload the necessary records.
Separate small business account
If you outsource your payroll, we recommend that you set up a separate small business account for your payroll and ensure that your service provider does not have access to your primary account. Also, in case of distress, you can make sure there is money in your payroll account, even if your main account is overdrawn. There is nothing that affects morale more than paychecks.
Install Bookkeeping Service software
There are a number of excellent Bookkeeping Service software packages for small businesses, but choosing the right one is not always easy. The better the software is for your small business, the easier and more efficient it will be to use. About 82% of professionals surveyed believe that the initial implementation of a computerized Bookkeeping Service system for a small small business should be done by a specialist.
You should have a professional set up your accounts, products and services, customers, suppliers, invoices, etc. If necessary, ask them to show you how to modify the lists. These lists will make your daily tasks, such as invoicing and bill paying, much easier.
The first seven Bookkeeping Service tips apply to all small business owners, whether you do your own Bookkeeping Service or delegate it to a professional. All you have to do is decide which parts you want to do yourself. Here’s a list of basic Bookkeeping Service tasks and my tips for new small businesses.