6 Powerful Ways To Track Your Business Finances
Every small business needs a way to track business finances. It might sound like something you don’t need to do when you first get started, but I always tell business owners that NOW is the time to start tracking your money.
I’ve been in business for a long time, and I’ve helped many entrepreneurs take charge of their finances. And I’m a HUGE proponent of bookkeeping and accounting, even if you’ve just started your business. Now, that might sound obvious coming from an accountant like me, but it’s more than just a professional bias.
I firmly believe that tracking your bookkeeping is the #1 tool to growing your business.
Why is it that big of a deal?
Because if you don’t have any information about how much money flows into and out of your business, or if you have incorrect or incomplete financial data, it can lead to faulty business decisions. Which does NOT help you achieve the business goals you desire the most. In fact, it can lead you WAY off track.
Therefore, having clear, precise monthly financials is imperative to reaching your business goals. This means tracking your business finances the RIGHT way from the start.
Tracking your business finances becomes even MORE significant around tax time.
Are you part of what I like to call the “tax scramble?” This is what happens when you find yourself scrambling at the end of the year to find, gather, and add up your bookkeeping info so you can file your taxes on time.
This is what I see happen to SO many business owners. They don’t think much about their bookkeeping and accounting for 364 days a year–and then the tax scramble hits, and that last day is one STRESSFUL scramble!
What can you do to avoid the small business tax scramble?
A lot of my clients know that it’s important to have a system in place, but they have no idea where to start. But the good news is that tracking your finances does NOT need to be complicated. In fact, you can get started right now without having to take any bookkeeping or accounting classes!
Here are my top 6 tips to track your business finances with ease:
1. Use a good accounting system (even if it’s simple)
If you’re just starting out, you can track your monthly income and expenses using a something as simple as an Excel worksheet. So start here!
Then, when you’re ready for the next step, I recommend getting started with QuickBooks.
2. Keep our business and personal income separate (this is a big one!)
Many business owners don’t know this, but it’s huge.
As a small business owner, you need to keep your personal and business income separate. This means a separate place for business income to land (even if it’s as simple as a dedicated PayPal business account). It also means keeping your personal and business expenses and charges separate.
If you’re old-school and have everything on paper, keep separate folders for business and personal expenses. Sort out your income and expenses each week, and send the documents to your bookkeeper at the end of each month.
Either way, be sure to implement this rule as soon as you can!
3. Save EVERY Receipt
Yes, that’s right–ALL of them, even if you don’t think you need them. Because if you are ever faced with an audit, the IRS has a very short sense of humor about any wild stories on how receipts got lost. Don’t take a chance that might cost you a major tax headache in the future. Keep your receipts, and keep them organized on a monthly basis.
Which brings us to #4…
4. Keep your paperwork (digital or paper) properly organized
Have a system to keep your paperwork organized, even if it’s simple. Keep all necessary files either near your desk (for paper files) or on your device (for digital filing). You’ll also want to have a running checklist of everything you need each month (income, expenses, etc.).
5. KNOW what you CAN and CANNOT write off.
This can be a tricky one, so let’s start with an example.
Let’s say that you paid the neighbor girl to babysit while you went to a networking meeting, and you gave her $40. Can you write that off as a business expense? No, you can’t write that off.
BUT, suppose you run your business from an office in your home. In this case, you can deduct a portion of your security system bill, your water bill, your gas bill and your internet fees as business expenses.
Be aware of what counts as a business expense and what doesn’t. Ask your accountant or CPA for the most up-to-date information!
AND, if you want my handy checklist 20 Tax Deductions Even Experienced Entrepreneurs Might Miss, you can grab that HERE! 🙂
6. Have an internal control system set up (even if it’s simple!)
Be sure to include internal controls in your accounting system, especially if you work with a bookkeeper or an accountant. Internal controls are simply a list of policies and procedures. They’re intended to safeguard your resources against loss due to waste, abuse, mismanagement, errors and fraud.
For more on internal controls and why they’re so important, check out this post right HERE.
This should help get you track your business finances right from the start! So jump right in, and get your bookkeeping and accounting systems started (even if it’s with nothing more than an Excel spreadsheet).
Now, I’d love to hear from you. How does all of this land for you, and what questions do you have? Leave me a comment and I’ll give you my best answer!
Until next time,
Love, light, and MONEY, honey…
Kaylee
P.S. Want to make the most of your Tax Deductions this year? Get my FREE Checklist 20 Common Tax Deductions even experienced entrepreneurs might miss right HERE!