Written by Jonathan Rowland, CommunityWorks Business Development Coach
Keeping track of all the financial transactions is probably one of the hardest things that needs to be done for business owners. Here are some tips that can help avoid those accounting woes.
First off, no matter what, do not commingle funds. This means you will need a separate bank account from the personal account. This will make it easier to track substantiate business expenses to monitor business performance, take advantage of tax deductions, and allow personal liability protection by keeping funds separate.
Secondly, consult a bookkeeper. After establishing your business account, the next step should be selecting a bookkeeper that fits your business size. This means interviewing to understand their size and cost structure. Once you have found a fit, consult with them on an accounting system that they recommend and are proficient in. This will save lots of money in the long run.
Third is to keep accurate business records. The IRS requires that you keep records for at least 3 years. Records a business needs to maintain are listed in detail in IRS Publication 583. Expenses, records showing what you have spent to operate, and gross receipts are examples of records you will need to maintain.
Lastly, keep your books up to date. Keeping your books up to date is imperative to understanding the financial positioning of your business. If you do not know how much your business is profiting or losing, you will not fully understand how to grow your business, nor how to express capital needs to a bank, CDFI, or investor.
These tips are by no means an exhaustive list of small business accounting needs, but by taking these few steps to establish strong accounting processes at the beginning, there’s increased likelihood of a successful, profitable, and long-lasting business. Although bookkeeping is not a passion of most small business owners, we must frequently review these critical financial metrics to capitalize on opportunities to grow and ensure that our companies are not on a path to insolvency.
Interested in working with a financial coach or business coach? Learn more here.