The freedom of being your own boss and growing your own small business over the years is unquantifiable. However, you can quickly get bogged down in the numbers if you’re not keeping track.
Following bookkeeping best practices from the beginning means that you’ll be able to run your business smoothly. You’ll find that there are many benefits to bookkeeping beyond making tax time easier.
Read on to learn three bookkeeping practices that can reduce stress and get your financials back in shape!
1. Separate Personal and Business Expenses
When you first begin your small business bookkeeping, it may not make sense to separate your earnings from your personal checking account. However, getting into the habit sooner rather than later can save you a lot of hassle down the road.
For instance, separating your personal assets from business can aid you when it comes to potential IRS audits. You’ll also have an easier time tracking all of your business expenses when they’re taken from your earnings in a separate account.
Lastly, in the event that your business is sued, you won’t have to worry as much about personal liability. This is because there will be a clear delineation between your personal and business assets.
2. Record Your Revenue and Expenses
Once you have a separate business checking account, you’ll still want to record your income as well as expenses. Keep in mind that when it comes to bookkeeping tips for tracking revenue, it’s recommended to use the medium that makes the most sense for you.
For instance, if you’re used to creating Excel spreadsheets, this can be an easy way to keep track. You can also use old-fashioned pen and paper. Categorizing all of your revenue and expenses gives you the ability to see where you’re growing or losing money.
This will also make it easier when it comes to calculating your deductions come tax time. If you don’t want to do the work yourself, consider using online bookkeeping software or services such as hrwisellc.com.
3. Set Financial Goals
Last but not least, once you start bookkeeping you’ll be more motivated to start setting short and long-term goals for your business. You’ll have a better understanding of how much you make per month as well as your net profits after expenses.
This means that you can set realistic financial goals that are achievable for you. You’ll also be better prepared for emergencies.
Budgeting for new equipment, software, or hiring other professionals to make your life easier will be far less stressful. You’ll know exactly how much you can expect to bring in each month.
Best Bookkeeping Practices for Peace of Mind
By following this bookkeeping advice, you’re setting up your business for long-term growth. Beyond making it easier to do your estimated taxes per quarter, you’ll also be able to make more informed decisions.
For instance, by knowing how much is coming in each month, you can set financial goals and budgets with peace of mind.
Ready for more straightforward tips on how to grow your business? Keep reading the blog!