6 Bookkeeping Essentials for Home Pros
It may not be the most fun part of running a business, but bookkeeping is both necessary and beneficial for business owners. It helps businesses to effectively manage cash flows, plan for the future and have greater overall financial awareness. It also helps us stay in compliance with federal and local tax agencies requirements.
In this blog I’m going to share 6 essentials for efficiently managing your bookkeeping that every business owner should know to help you grow your business and increase your income with confidence. Let’s dive in!
1. Organize Your Money
The first is setting up a separate bank account for your business, this way you can keep your business income and expenses separate from personal transactions. Most banks offer a free business checking and savings account so be sure to check with your bank to see what’s available to you.
Should I also open a business credit card? My answer to that is maybe! Only apply for a business credit card when you’re ready and make sure to pay down the balance each month to avoid interest. Interest can really add up quickly on credit cards.
Overall, try to keep your system for money management simple, less is better in my opinion. I always recommend at least one checking, and one savings account for taxes. If you want to take it one step further, have an additional savings account for business savings, or an emergency fund for your business.
2. Track Your Transactions
Next, you need a system to track your income and expenses. You can use an Excel spreadsheet, Google Sheets, or an accounting software. The most important thing when it comes to choosing a system is that you choose one that you will be consistent with.
I recommend QuickBooks Online if you are going to use an accounting software. It pulls in bank transactions automatically, makes invoicing easier, and has a built-in reconciliation feature to make sure all transactions have been accounted for. The financial reports that you get through accounting software also make it easy to quickly and confidently analyze your numbers, which is essential for growing your business.
3. Getting Paid
You also need a system in place to accept payment. Accounting software like QuickBooks makes it easy to get paid. You can email the invoice to the customer directly and they can pay you online either by ACH or card. There is a cost to accepting payments electronically, but it is a cost of doing business, and the good news Is that you can deduct those payment processing fees.
If you have a customer relationship management system, like Honeybook or Dubsado, that is another great way to send invoices and get paid. I would recommend investing in one of these for a seamless onboarding & offboarding experience as well. If you Venmo to accept payment, try to transfer deposits right away to your business checking instead of keeping a balance in Venmo, it will make your bookkeeping so much easier.
4. Save Your Documents
You need a system for saving documents like receipts. While it may seem like extra work, the key to remember is that you need to have proper documentation if you were ever to be audited. The IRS accepts digital copies of receipts, credit card statements are not sufficient.
Statements prove you bought the item, but don’t prove deductibility as they cannot tell from a bank statement what the purchase was.
Opt for emailed receipts when possible. If you have a paper receipt, take a picture or scan the document and send it to your email right away, or Google Drive. I use Hubdoc in my own business, which allows easy capture of receipts using their app, and a dedicated email address that I can use to forward emailed receipts to. It connects to QuickBooks as well which allows me to attach the receipt to the transaction and store it neatly in Hubdoc.
5. Track Your Mileage
Organizers are driving a lot for work, and chances are you are using your personal vehicle so you will need a system in place to track your mileage. Whether you are taking the Standard Milage deduction, or Actual Expense method, you will track mileage for both.
Mileage can be tracked manually in a spreadsheet, but there are plenty of apps that are also great for this like QuickBooks or MileIQ. I like and use MileIQ, it tracks all trips and makes it easy to categorize between personal and business trips.
6. Plan For Tax Payments
There are many factors that go into determining how much tax you owe. Once you have up to date financial reports, you can meet with your tax preparer to help you determine how much to set aside for estimated taxes. A general rule of thumb is to plan for 25-30% of your net profit (Sales – Expenses = Net Profit).
Some states have state income tax, that rate is usually easy enough to find out by just searching for that information.
Your state may also require sales tax on services provided, though it’s not as common - it’s also a good idea to check and see if sales tax needs to be collected and sent to the state for product sales. If you are unsure, check with your state and local tax authority, the next best option would be to check with a local CPA.
Depending on where you live, there may be other state-specific taxes - be sure to check your local tax authority for more information.
Now that you know the 6 essentials to have in place to efficiently manage your bookkeeping you can move forward with confidence in your business. If you want a more personalized experience when it comes to managing your bookkeeping, head to my website to apply today and follow me on Instagram for more tips.
Shauna Kilday – KLS Bookkeeping
Shauna helps other business owners achieve their goals while also doing what she is most passionate about. When you work with Shauna, she becomes part of your team. Shauna wants you to be excited about your finances and feel empowered to use your numbers to make meaningful decisions for your business.