Did you know that a lot of small business owners do their own accounting to save money? As a small business owner, keeping track of your money is key to success. You need to make forecasts, send invoices, and handle payroll and taxes. These basic accounting steps can really help1.
Payroll might need to be done weekly, bi-weekly, or every two weeks. And, each business has its own tax rules. So, it’s very important to keep up with these tasks1.
Doing your own accounting can save you money. But, you need the right systems and practices1. Payroll services can save time and make sure things are accurate for a good price. Some taxes, like FICA, must be paid monthly or every two weeks to the IRS1.
Filing the FICA return (Form 941) is due every quarter. And, FUTA taxes deposits are also due quarterly. The FUTA return (Form 940) is filed once a year1.
In this article, I’ll share important accounting tips for small businesses. These tips will help you manage your finances better, improve your cash flow, and follow tax rules. We’ll cover how to keep your business and personal money separate, set up accounting systems, and track expenses. These strategies will help you succeed financially. Let’s get started!
It’s very important to keep business and personal money separate. This is a key part of bookkeeping best practices and financial management for small businesses23. Sarah Sinicki, Director of Business Development at Team 80 Small Business Accounting and Bookkeeping, says, “Use business accounts for business stuff and personal accounts for personal things. Your CPA will be happy at tax time. Mixing money can cost a lot to sort out.”
Having a business checking account and using business cards makes tracking easier3. Paying yourself from the business account helps keep things clear3.
Keep personal and business receipts apart. Also, note any personal items used for work3. Teaching employees and partners about this is also key for good money habits3.
“Run all business expenses through the business, and pay all personal expenses from a personal account. Trust me, your CPA will thank you at the end of the year. You don’t want to spend lots of extra money untangling combined finances.”
– Sarah Sinicki, Director of Business Development, Team 80 Small Business Accounting and Bookkeeping
Following these steps makes managing money easier for small business owners23. It helps avoid the trouble and extra costs of mixed finances23.
Setting up a good accounting system is key for any small business. You need to open a business bank account and pick the right accounting method and fiscal year.
First, open a business bank account. This keeps your business and personal money separate. It helps with taxes and makes tracking easier4. Small businesses find it helpful to keep their money separate.
Then, choose an accounting method – cash or accrual4. The method you pick affects how you report money and expenses. It’s important to pick the right one for your business.
Next, make a chart of accounts. This is a list of all your business’s accounts. It helps organize your money4. You’ll need an EIN or Social Security number and business documents to open a bank account.
Lastly, decide on your fiscal year. This is the 12-month period for your accounting4. You can choose when it starts and ends.
“Setting up a streamlined accounting system from the start can save you a lot of headaches down the road. Trust me, your future self will thank you!”
By setting up these systems, you’ll have a strong financial base for your business45.
As a small business owner, keeping good bookkeeping is key. You need to track expenses, record transactions right, and keep receipts. Also, you must match your bank statements6.
It’s important to track all business expenses. This includes things like ads, bank fees, and office supplies6.
Keeping proper documentation is crucial. You need receipts for accurate records and tax deductions. The IRS wants you to keep these for three years6.
Regularly reconciling your bank statements is a must. It helps find any mistakes in your records7. Using accounting software can make this easier. It helps organize your records and makes reports67.
| Expense Tracking App | Features |
|---|---|
| Zoho Expense | Receipt storage, custom reporting, multicurrency support |
| Expensify | Receipt storage, custom reporting, multicurrency support |
These expense tracking apps have free features. They can make your bookkeeping easier and help you manage your finances6.
Using these expense tracking and transaction recording tips can help. You’ll have accurate records, easier tax prep, and insights into your business’s health67.
Managing money for a small business can feel hard. But, with good accounting tips, you can do better. This helps with money management and keeping cash flow good8.
It’s key to keep your business money separate from personal money8. This makes things easier for taxes and avoids problems later8. Having different accounts for business and personal use is smart9.
Also, making a detailed budget and financial plans is helpful10. This lets you see how your business is doing and make better choices10. Checking your budget often helps spot trends and stay on track with goals10.
Don’t forget about payroll and taxes for your business9. You must pay taxes on time to avoid fines9. Using online time tracking makes payroll easier and keeps records right8.
Getting advice from experts is also smart8. Talking to a SCORE mentor or accountant can offer great advice. They can help with money management and finding ways to save8.
By following these tips, small businesses can do better with money. This leads to more success and a stable business10. Keeping up with finances helps avoid problems and keeps your business healthy8.
As a small business owner, knowing your financial statements is key. They help you make smart choices and keep your business healthy11. You’ll find three main types: balance sheets, income statements, and cash flow statements11. These give you a deep look into your business’s money, how it makes money, and more11.
The balance sheet shows your business’s money situation at a certain time, like the end of a year12. It has three parts: what you own, what you owe, and what you own outright12. Assets can be short-term or long-term, and debts are due soon or later12. The balance sheet’s main rule is: what you own equals what you owe plus what you own outright13.
The income statement shows your business’s money in and out over a time, like a year or quarter12. It lists your income, costs, profits, and more13. By looking at this statement, you can see how well your business is doing13.
The cash flow statement follows your business’s cash in and out, split into three areas12. If more cash comes in than goes out, you’re doing well. But if it’s the other way, you might need to adjust13. This statement helps you see if you can pay bills and invest11.
Financial statements use facts, rules, and judgments to be right and fair11. Knowing these statements helps small business owners make better choices for their company’s future11.
| Financial Statement | Key Components | Insights Provided |
|---|---|---|
| Balance Sheet | Assets, Liabilities, Equity | Financial position, resource allocation, debt levels |
| Income Statement | Revenue, Expenses, Net Income | Profitability, operational efficiency, earnings potential |
| Cash Flow Statement | Operating, Investing, Financing Activities | Cash inflows and outflows, liquidity, ability to pay bills |
“Financial statements can provide valuable insights that help small business owners make informed decisions.”
Being a small business owner means dealing with lots of taxes. It’s important to know what you need to do to stay in good standing14. You have to pay for federal and state income taxes, self-employment tax, payroll taxes, and excise taxes. But, you can save money by knowing what you can deduct.
One big tax for small businesses is the self-employment tax. It’s 15.3% on top of your regular taxes15. But, you can lower this by writing off business costs. For example, finding $6,000 in business expenses can save you over $1,500 in taxes15.
There are many things you can write off, like car costs, equipment, and even learning new skills1516. Keeping good records helps you use all the deductions you can. This way, you pay less in taxes and save more money.
| Tax Deduction | Eligibility and Details |
|---|---|
| Standard Mileage Rate | Businesses can deduct $0.655 per mile for vehicle expenses or use the actual expense method15. |
| Contractor/Freelancer Fees | Deductible as a business expense when hiring freelancers or independent contractors15. |
| De Minimis Safe Harbor | Small businesses can expense assets costing less than $2,500 under this election15. |
| Section 179 Deduction | Allows businesses to deduct up to $1,080,000 of property placed in service during the tax year15. |
| Bonus Depreciation | 100% deduction available for machinery, equipment, computers, and furniture purchases16. |
| Business Education Costs | Fully deductible expenses that enhance business skills and knowledge15. |
Keeping good records and knowing the tax rules is key for small businesses14. By understanding your taxes and using all the deductions you can, you can save money. This lets you grow your business and succeed in the long run.
“Run all business expenses through the business, and pay all personal expenses from a personal account. Trust me, your CPA will thank you at the end of the year. You don’t want to spend lots of extra money untangling combined finances.”
– Sarah Sinicki, Director of Business Development, Team 80 Small Business Accounting and Bookkeeping
As a small business owner, using accounting software can really help. It makes bookkeeping and managing money easier17. QuickBooks and FreshBooks are great because they help with tracking expenses, sending invoices, and more18.
These tools can do a lot of work for you. This means you might not need a full-time accountant. It saves you time and money.
When picking accounting software, think about your business’s needs18. QuickBooks starts at $15.00/month. It has lots of features like tracking money and sending invoices18.
FreshBooks starts at $7.60/month. It helps with invoicing and tracking time. It also has budget spreadsheets and secure backups.
There are also new tools like Melio and Pabbly Subscription Billing18. Melio is free and helps with bill pay. It gives you insights into your payments and cash flow18.
Pabbly Subscription Billing starts at $9/month. It gives you real-time data on payments and customers. It also automates workflows and invoice creation.
Choosing the right accounting software is key for your business’s money management17. LLCs, partnerships, and corporations need a separate business bank account17. The IRS doesn’t need receipts for expenses under $75 for US store owners17.
You can also deduct home office expenses. And, you can deduct expenses used for both personal and business.
| Software | Pricing | Key Features |
|---|---|---|
| QuickBooks | $15.00/month | Tracking income and expenses, invoicing, reporting, estimates, sales and taxes tracking, receipts organization |
| FreshBooks | $7.60/month | Invoicing, time-tracking, budget spreadsheets, invoicing integration, secure backups, invoice tracking |
| Melio | Free | Business bill pay, payment activity insights, upcoming bills, cash flow monitoring, unlimited users, approval workflows, bill capture |
| Pabbly Subscription Billing | $9/month | Real-time metrics on payments, revenue, active customers, new subscriptions, workflow automation, customer communication, invoice creation |
The right accounting software and tools can really help your business. They save you time and money. This lets you focus on growing your business1718.
As a small business owner, you might get stuck in accounting and bookkeeping tasks. These tasks can take up a lot of time. Outsourcing your accounting can help a lot19. In fact, 40% of small companies say these tasks are the worst part of running a business19.
Outsourcing your accounting and bookkeeping can save you time and resources. This lets you focus on what’s important in your business20. You can get help with bookkeeping, invoicing, payroll, and more20. Professional accountants and bookkeepers can keep your records right and help with taxes.
Also, outsourcing can save you money compared to hiring a full-time accountant19. Outsourcing costs less than $5,000 a month, which is a big savings19. You won’t have to pay for things like insurance or employee training19.
Outsourcing lets you work with a team of experts, like CFOs20. This is great for small businesses that can’t afford a big accounting team20. It also helps keep your finances safe from fraud20.
Choosing to outsource your accounting might seem scary at first. But it can really help your business grow20. It saves time, cuts costs, and gives you expert advice. This makes outsourcing a smart choice for your business20.
Good accounting and financial management are key for small business success. By using accounting best practices, financial management tips, and tools from this article, owners can manage their money better. This helps improve cash flow, follow tax rules, and make smart choices for small business growth21.
It’s important to keep business and personal money separate. Using accounting software and getting help from experts are also good ideas22. Keeping accurate records, using tax breaks, and automating bookkeeping help small businesses grow and succeed23.
Good accounting and financial management are vital for small business health. By following these best practices, owners can help their businesses grow, make more money, and stay strong in the market.
