5 Tips for Business Owners Looking to Organize Their Books
by Tony Smith
(Guest Author from Accounting Edu)
Finding your way out from under that intimidating pile of paperwork.
What will your New Year's resolution be?
If you're like most small business owners, your New Year's resolution will likely have something to do with getting organized, staying organized, or simply finding your way out from under that intimidating pile of paperwork in the corner of your office.
You've been focused and hard at work building your business and, as a result, your bookkeeping has taken a backseat. But let's face it - As a business owner, your unorganized bookkeeping may have resulted in lost money (Do you really remember if all invoices were paid?) and quite a bit of frustration (Exactly how long did it take to find that sales receipt last week?). Plus, every receipt-less deduction and lost invoice could be setting the stage for an audit. And no one really needs any extra attention from the IRS (or CRA for Canadian readers).
So, after you've gathered all of your 2022 tax documents for tax season and filed your business taxes (and adequately stressed yourself out in the process), it is time to clean house and get control of your bookkeeping so it no longer has control over you.
Here is our Top 5 list for making sure you no longer lose sleep over the loss of your inventory spreadsheet (that you could've sworn you left on your desk), and to see to it you don't prepare for tax season on your hands and knees with a flashlight hoping to find those misplaced gas receipts under the front seat of your car:
1) Get familiar with all of the fantastic bookkeeping software out there. QuickBooks has been a staple in small businesses across America for some time, and for good reason. It's incredibly user-friendly and easy to set up, thereby making it a great choice for nearly any type of business. Take a few hours and familiarize yourself with QuickBooks or some of the other new bookkeeping software available, and you will soon discover that organizing your books doesn't need to be complicated after all.
Comprehensive bookkeeping software should allow you to perform any number of bookkeeping tasks, from tracking your accounts payable and receivable and entering payroll, to reconciling your bank account and tracking inventory. Bookkeeping software is the easiest way to track all of your business activity, so that the next time you need to review invoices you won't need to go on an office scavenger hunt to do so.
2) Develop a system for keeping track of your mileage. If you are like most entrepreneurs or small business owners, you likely spend quite a bit of time in your vehicle. But you must keep clear records of your mileage and travel expenses if you are to enjoy the benefits of business deductions. The easiest way to ensure you are doing so is to keep a log in your car so every time you run a business-related errand you simply enter the odometer reading before you leave and then again upon your return. Be sure to include the date and the reason for the trip. Then, at the end of the month, you simply rip the monthly log from your notebook and enter it into your bookkeeping software. Or, if you want to put that smartphone of yours to use, consider downloading one of the many mileage apps for both Apple and Android users.
We like Trip Cubby for the iPhone because it can track multiple drivers and multiple vehicles, and its advanced search feature allows you to filter your data for quick and easy views. The Mobile Mileage app is also great because it not only tracks your mileage, but it also allows you to take pictures of your travel receipts, which may finally put an end to that scattered pile of receipts that always seems to find its way to the floor – and occasionally out the door.
3) Synchronize your bank statements and credit card statements. Most of the time, the credit card companies and banks can accommodate your request to end each statement with a month-end cutoff date, thereby allowing you to better track your business' activity each month and better reconcile your statements.
It becomes much easier to match expenses when your bank and credit card statements are in synch with one another. And, if you haven't done so already, always keep your personal and business accounts separate from another. Reconciling your bank statement becomes all the more difficult when you must attempt to distinguish between personal and business transactions.
4) Choose a good business credit card. A business credit card is a small business owner's best friend. Unlike consumer credit cards, business credit cards usually come with a host of cool perks, such as higher credit limits, discounts on everything from office supplies to rental cars, rewards programs, and access to a number of beneficial reporting tools.
Further, a business credit card with a solid history of on-time payments will likely boost your business' credit rating, thereby allowing you to secure competitive rates on everything from lines of credit to office equipment and machinery financing. Beyond all that, a business credit card is a must for your bookkeeping efforts because its statements can be separated to show all expenses in specific categories for quick and easy reconciliation purposes. Use a business credit card for all purchases, from office supplies to gas, and in turn you get a neat and tidy history of your expenses - separated by category - at the end of every month.
5) Be prepared in case of theft, loss or computer failure. Your best line of defense for protecting your digital records is through computer backup, each and every night. If you don't have a computer backup plan in place, now may be the time to talk to a computer specialist. Saving your data at the end of each day can save you from a host of bookkeeping problems if your computer decides to die.
Many professionals suggest leaving an audit trail, as well. This includes printing records of everything at the end of every month and holding onto all invoices and checks. Although digital record keeping is certainly convenient, it may be in your best interest to make paper copies at least once a month of all your business' activity so you won't panic if you run into a computer glitch.
About the Author:
Tony Smith is an editor at Accounting Edu, an online CPA exam and accounting education center. Accounting Edu is home of resources such as CPA requirements for each state, accounting career salaries, and guides to become an accountant.