1. Use a business bank account and cards for all business transactions.
Keep a business bank account and only make purchases and accept payments there.
If you combine business and personal funds in the same account, the first question you need to ask yourself every time you see a transaction is: Is this for my business or did I do it just for myself? By setting this rule, that question is permanently answered, freeing up your mental resources for other things. Do not underestimate this thought process.
When you have a bookkeeper this will save you hundreds of dollars if you ever need to do a cleanup and ensure you won’t have to look for a new bookkeeper next year.
When you have a CPA, this could save you THOUSANDS, because they charge a higher rate and often have more overhead to pay for. It will also make their job easier.
2. Streamline your business with software
Popular software options include Quickbooks Online (which I use) and Xero. These will track your income, expenses, and invoices as they happen. As long as you have a data plan or internet, you can track everything on your computer and even on your phone. They can even handle payroll if you want.
If you sell subscriptions or have retainer fees, these can be automatically set up to recur at the intervals you need.
Bank reconciliations are easier because you simply double-check and fix what these software solutions automatically do.
3. Keep current with your transactions and receipts
Sometimes you pay with a card, sometimes with cash, or even check (for those places that still insist on it). You can do it manually and keep physical copies of all these. Another way is to use software to track and categorize these expenses. Quickbooks does a good job with this and as you categorize more and more transactions, it learns over time how to do a better job.
If paying cash and getting physical receipts. You can use a tool like Expensify or Dext to scan the receipt for important info and store it digitally. Dext feels simpler but $24 a month at the time of this writing. Expensify has more bells and whistles but is about $5 a month as an annual subscription. Both integrate with accounting software like Quickbooks so each receipt scan will get the job done in a single step.
4. Stay up to date on cash flow
Preparing a cash flow statement takes time, but if you have accounting software that tracks your transactions, it can be easy to make. Just make sure the specified dates cover the time period you’re measuring. Comparing these statements across months may help you identify trends like seasonal demand in customers and expenses, and will help you plan better.
5. Tax prep: A day’s prevention is a pound of cure
Many regular expenses are opportunities to lower your tax burden. Business meals. Travel. Office supplies. The interest on your loans. The list goes on. Track which can be deducted and how much based on the advice of your tax professional.
Save a percent of your profit for the taxes you think you’ll pay. Until you finish at least a year in business, try saving as much as the tax rate for your business structure as if there were no deductions.
Being proactive on your finances will lower your stress, make tax cycles easy to manage, and helps you make the kind of choices that will make you rich.
To get my assistance in getting organized, let’s chat. I can save you 80 hours a year on your bookkeeping, while avoiding the cost and headaches of hiring an in-house employee. Schedule a free evaluation of your books today!