6 Small Business Bookkeeping Hacks You Can Start Today
February 01, 2022
by Kimbree Redburn
If you’ve experienced a moment of panic trying to manage your new business’s finances, you’re not alone. Launching a small business is an exciting and stressful time, but bookkeeping doesn’t have to add to the pressure.
Here are 6 small business bookkeeping hacks you can start today:
Hack #1: Separate Your Business and Personal Finances
When you’re first starting out, it can be tempting to run everything from your personal bank account. It may seem easier at first, but it will complicate things as your business grows and changes.
Instead, start a checking account for your business. This will allow you to capture all the cash inflows and outflows of your business. Knowing exactly what the business is spending and earning will help with taxes and allow you to be sure the expenses are necessary. Plus, you’ll have a better sense of where the business is financially and how much you can afford to pay yourself.
Once you’ve set up a business bank account, you might also want to get a credit card for the business. Using this card responsibly will help you build business credit, which could be important if you ever need a loan.
It’ll also give you buying power while keeping your business expenses separate from your personal spending. As with any credit card, be sure you understand the terms of the account and any fees it may have. And be sure to do your best not to charge more than you can pay off each month.
Hack #2: Find a Tracking System that Works for You
Just like tracking your personal expenses helps keep you on budget, it’s important to track your business expenses too. There are a couple of different ways you can choose to track your business expenses.
First, you could track your business expenses and income traditionally, by hand using Google Sheets or Excel. If your financial situation is uncomplicated, or you want to track by hand as you get going, that is fine. Just be sure to check in with your spreadsheet often to keep it up to date. Set a time once a week to review your credit card statements and bank statements to be sure you’re keeping accurate records.
You could also find accounting software to keep track of your income and expenses. Using software could offer you a few advantages over tracking by hand:
- You can typically link your bank account and credit cards to your account. This will then pull in transactions automatically.
- Accounting software can help you track miles driven for work.
- Some accounting software even allows you to invoice your clients directly from the program.
- Most accounting software can estimate your quarterly and annual taxes.
Hack #3: Categorize Your Business Expenses
Now that you have a system in place for tracking your spending, it can be helpful to categorize expenses as they occur.
Breaking your business expenses into categories can help you understand where your money is going. This can help you see what investment of resources is yielding the best results. It can also give you an indication of possible overspending or areas to cut back in to make the business more profitable.
Categories you might want to include in your tracking could be advertising, marketing, your business website and associated costs, the software you need for your business, office supplies, and operating expenses. The categories for your business will likely be as unique as your business itself, but having the categories will help you keep your expenses straight.
Hack #4: Check in Regularly
Once you have your categories and tracking system in place, it’s important to check in regularly. Be sure to check in even if you are using software that tracks things automatically. Keeping up to date on your business finances will let you know how it’s doing.
Make recurring “Payroll and Accounting” 30-minute meetings on your calendar. These meetings can be weekly or bi-weekly. Over time you’ll learn the best flow for your business.
Schedule these meetings for a time when you know that you won’t have other obligations. This ensures that you will be able to focus. Then, show up for each meeting and review your accounts, income, and expenses. Look for any outstanding invoices that you may have for clients and any upcoming bills you need to pay.
Hack #5: Stay Organized
Staying organized can help you be sure you aren’t missing anything. Keep receipts for things you purchase for the business. You can store receipts digitally or in a folder. Just have them on hand in case you need them, and be sure your charges are captured accurately in your accounting system.
In addition to keeping track of receipts, you’ll want to organize all of your important business documents. Things like insurance policies, contracts, tax paperwork, bank account information, and anything else that you may need to refer back to, should all be kept together in a safe place.
Hack #6: Break Up Your Bigger Expenses
Sometimes as a small business owner, you may also face payments that are due in frequencies other than monthly (quarterly, semi-annually, annually). If these expenses aren’t taken into consideration in your operating budget, they can derail your business finances when they are due.
Instead, it can be helpful to break these bigger bills into monthly amounts and save them so you can be ready when the bill is due.
To find out how much to save each month, consider how many months you have between now and when the bill is due. Then divide the expense by the number of months. This will give you the monthly amount you need to save to be ready when the payment is due.
For example, if you pay for your website once a year and it costs $250, divide $250 by 12. This will show you that you need to save $21 a month to be ready to pay for your website when it is due.
Once you’ve determined how much you need to save for each of your bigger expenses on a monthly basis, add these amounts together to find your total monthly savings for your bigger bills.
This will help you be prepared when the bills are due. It will also keep your budget on track because those bigger bills won’t require any big budgetary adjustments when you pay them.
Starting a business or side hustle is exciting and stressful. One thing you can do to reduce the stress is set your business finances up for success.
Whether you are just starting your business or have been working for yourself for a while, making sure the finances are in order should be a priority.
These 6 small business bookkeeping hacks you can start today will get you pointed in the right direction. So keep the excitement alive in your business, but ditch the financial stress. Get started today!