You want your small business to fulfill its potential, but you may not realize how much a proper bookkeeping system can either help or hinder that goal. No matter your small business industry, you likely aren’t an accountant professional. That’s why it’s good to pick up some small business bookkeeping tips to better your chances of keeping your company financially afloat.
Create a Separate Business Bank Account
Do not mingle business funds with your personal funds. Open a business bank account so you have an easier time dividing personal funds from commercial funds. Another reason to open a separate bank account is so you make filing taxes easier. Also, if the IRS audits you or if you have to file for bankruptcy or someone sues your business, dividing your income adds a layer of insulation for your personal assets. Finally, depending on your business classification, such as LLC or corporation, you may have no choice but to set up a separate bank account for your company.
Keep Close Track of Your Expenses
Track every business expense, no matter how minor or seemingly insignificant. This small business accounting tip allows you to keep a close eye on business growth, track tax-deductible expenses, prepare tax returns and create financial statements. Specifically, decide how you want to file business spending receipts. Common business receipt categories include home office expenses, meals and entertainment, business travel and vehicle-related spending. It is critical that you properly classify and track all expenses.
Create a Payroll System
Even if you don’t yet have employees helping you, if you know you’ll one day hire people, get a payroll system in place. Use your expenses, business goals and industry demand to determine whether it makes sense to hire an independent contractor or a full- or part-time employee. The designation is essential to determining which forms the person must sign for tax purposes.
For independent contractors, track how much you pay them for each project, filing the proper forms with the IRS and having the contractor sign and return the necessary documents. With regular employees, deduct the proper taxes from their pay and create a regular payroll schedule. Consult with an accountant familiar with helping small business owners to ensure you withhold the proper tax amount and have employees/contractors sign the right forms.
Decide How to Accept Payments
There are plenty of payment systems available, so you must decide which is the proper fit for you and your organization. Decide which credit card processor or third-party processor offers the services you need most. Account for fees, such as single transaction fees and flat fees.
Investigate Your Tax Obligations
Touching back on business classification, different business types have different tax obligations. This is something else to talk over with an accountant. For instance, corporations are separate tax entities, so they’re taxed independently from the business owners. Sole proprietorships and other self-employed business models go through the owner’s personal tax return for all business income. Learn of your current tax obligations well before the next tax season rolls around; that way, you have a better chance of avoiding unnecessary fines and fees.
Look Into Import Tax
If you need to import and buy goods for your company, anticipate paying duties and taxes. Educate yourself on the most current U.S. import taxes, preferably before you import and buy goods.
Tending to the bookkeeping and accounting aspects of your company may not be the most exciting part of operating your small business, but there’s no going around it. Learn which resources you need the most to be a success, and reach out to financial experts for their professional input.