From spending accounts to tax forms, running a business means making sure your bookkeeping skills are first rate and error free.
There are so many facets to running a business, it is no surprise that things can often get unorganized, or forgotten about completely. But, when it comes to bookkeeping, it's important to make sure that things are in order and nothing — from an unpaid credit card to an insurance payment — goes unnoticed. Good bookkeeping skills are vital to survival and to help relay that message, I turned to Joy Phelan, a QuickBooks ProAdvisor at Phoenix Business Services LLC, whose tips, articles and advice can be found at http://lakewoodbookkeepingaccounting.com. Phelan teaches small business owners how to manage their business and records more effectively. Below are 8 tips from Phelan about how to best manage your books and keep on top of every dollar coming in and going out of your business.
1. Stay organized.
Phelan said to begin by gathering up all of your documents, stray files, the latest round of bills, and empty out that office drawer that's housing paid and unpaid bills, bank statements and pay stubs, and divide everything into six piles:
- Monthly bills, bank statements and pay stubs
- Investment Statements (401k, brokerage statements, etc.)
- Tax returns and supporting documents
- Policy documents and deeds
- Warranties and user manuals
- Forever Documents (marriage license, will, birth certificate, etc.)
Next, create a folder for each type of document, but put the forever documents in a portable fire and waterproof safe, and add new papers as they come in. Make folders within folders (for example, put all electricity bills in one and water bills in another).
2. How much time is enough?
Phelan recommends that self-employed folks and those with multiple revenue streams hold on to 10 years of records, just in case.
3. A few minutes each day.
Taking 15 minutes every single day to sort through your paper clutter, said Phelan, will save you time and frustration in the future.
4. Your monthly assignment.
All of your checkbooks and credit cards need to be reconciled at the end of the month, and re-checked often, according to Phelan. It might seem a bit excessive, she said, but it is easy for a large business to experience a money leak, "and money leaks often lead to the downfall of even the largest corporations. A great example is the client that had $120 going out on an auto-debit on their credit card for an advertising campaign that generated no income."
5. The software advantage.
A good software program will help you track expenses and income, posting them to the right accounts, Phelan stated. "You will be able to see exactly what your gross sales have been and what you've spent on office supplies."
6. Track everything.
It might seem a bit arduous, but Phelan said to keep a record of every single transaction you complete. "It is important not only for your own reference, but also for taxes and even legal proceedings," she said.
7. Good bookkeeping = good research.
One note about keeping your business books that many small business owners forget, Phelan said, is that aside from the tracking side of things for financial purposes, having good bookkeeping records can also help you in market research. "Know your sales, when they occur and what their dollar values are is vital information for your sales funnel as well as pricing and inventory."
8. Consider the home office deduction.
If you operate out of your home, you can utilize the home office deduction, according to Phelan. "It's not uncommon for companies operating out of the home to overlook the many tax breaks and advantages. The assets, items and even the space used in the home can be calculated for deductible taxes. There are some specific rules that must be followed though, so check with your tax preparer for specifics," she noted.