Running a small business can be challenging for anyone. Trying to juggle customer demands, manufacturing problems, and logistics nightmares doesn’t leave much time to focus on the finances of your business–let alone the bookkeeping.
This can create a huge problem for you business. Having a firm grasp on your business’ finances is the foundation for most key decision-making. Don’t worry, though. You don’t have to be a Certified Public Accountant to understand your finances. With a few study tips from the current CPA courses, you will be able run your business just as efficiently as a licensed CPA.
In this article, we’ll look at several ways to improve your bookkeeping, so you can run your small business better.
1. Personal vs Business Expenses
The key to improving your bookkeeping is to simplify it. Small business owners are notorious for comingling personal and business expenditures by using the same credit cards, bank accounts, or funds.
Don’t do this! Comingling funds is a bad idea for several reasons. First, it creates a mess that you or your CPA will have to clean up at the end of the year. Since, your business is not allowed to deduct your personal expenses, these will need to be removed from your books in order to file your tax return. Depending on the extent of your personal use of business accounts, this can be a lengthy process.
Second, there’s no way to find out meaningful information about your financial performance during the year if you a large portion of the expenses on your books are personal and will be removed later.
Keep your books simple. Keep your personal and company finances and accounts separate. It’s easier that way.
2. Keep on Schedule
Running a small business is time consuming. Every waking minute you have to put out fires and make sure your employees are on task. A busy schedule leaves almost no time to finish your bookkeeping.
Or worse, you might purposely put it off because you feel your time is better spent doing something else. This leads to a build up of bookkeeping work that will take forever to get finished.
Instead of putting it off, schedule time each week to knock out several tasks. For example, you might want to do bank reconciliations the first Monday of each month. You might also want to finish invoicing the second Monday of each month.
A schedule like this will help you stay on task, so your bookkeeping doesn’t pile up.
3. Create and Keep Reports
Bookkeeping isn’t only about inputting numbers into Quickbooks. It’s about recording your business’ financial transactions. This often involves keeping extra reports to help explain what’s going on in your bookkeeping system.
For example, it’s a good idea to keep report for employees’ vacation time earned, used, and carried over to future periods. It’s unlikely that you bookkeeping program has options to record this type of data, so it’s a good idea to keep an excel spreadsheet of this information throughout the year.
Another example might be reimbursements for business expenses paid personally and mileage for business use of your vehicle. Both of these expenses will need to be input into your software, but they are likely not tracked independently each year in a meaningful way.
It’s a good idea to keep separate reports and records of different transactions to support your bookkeeping. That way if you have a question about how something was entered, you can always refer back to your reports.
4. Payroll
Most small business owners try to do their payroll themselves because they want to save the money from hiring a payroll service. Although this sounds like a good idea at first, it can create a major time drain.
Payroll has to be done weekly or bi-weekly forever. That means every single week you will need to sit down and fill out all of the payroll documents. That’s a lot of time that you could be using to run your business.
Although this is one of the least popular outsource accounting services according to Statista, it’s a good idea to consider outsourcing your payroll. It will cost more than if you were going to do it yourself, but you will be saving so much time that it might be worthwhile.
Take the time that you would otherwise use doing payroll and implement strategies to grow your business. You will be far better off this way than trying to save a few dollars doing it yourself.
5. Hire an Accountant
Sometimes the best way to save time and improve your business is to simply hire an expert. After all, you didn’t go into business to be an accountant; you went into business to run the company that focuses on your strengths.
Consider hiring a professional who has passed the CPA exam to streamline your small business bookkeeping and save you time in the process. Then you will be able to focus on your customers, products, and business rather than worrying about the next bookkeeping deadlines.
Summary
Running a small business is time consuming, but it’s important not to neglect your finances. Instead, streamline your bookkeeping processes, so you aren’t wasting time doing trivial tasks.
Then you can spend more time analyzing your profit centers and understanding how you can grow your business the smart way.
