7 Efficient Small Business Bookkeeping Practices

If you’re like most owners, small business bookkeeping is one of those tasks you’d prefer to just get over with. It feels like a distraction from the real work of running your business. While you know it’s necessary, you also don’t want to spend more time and resources on bookkeeping than what’s absolutely necessary.

That’s why you need to make sure your small business bookkeeping practices are as efficient as they can be.

Here are some tips you can begin implementing today that will streamline your bookkeeping process and help make sure you reap the benefits:

  1. Use the right accounting system for your small business bookkeeping. It’s easy to just go with either the easiest possible system or the system that is unnecessarily complex. Instead, you need to choose an accounting system that fits your business, rather than one that matches your understanding of accounting. Specifically, you need to use an accounting system that matches your business structure. A sole proprietorship has very different accounting needs than an LLC. Likewise, you need to type your accounting system to match your business type. Cash-based systems are better for some businesses, while accrual-based systems will be better for others.
  2. Use a software bookkeeping solution. We’re to the point now where computerized small business bookkeeping solutions are fairly easy to use. They’re fast, convenient, and meet the needs of most small businesses right out of the box. A computerized system lets you accurately track income, expenditures, tax-related information, and more. There are plenty of software bookkeeping solutions to choose from; spend some time looking around and figuring out which is best for your business. Some, for example, might have features like smartphone access that you’ll want to have in a solution.
  3. Keep all of your documents organized. The time when small businesses needed to rely on shoe boxes to keep all of their receipts straight is over. That kind of approach is likely to get you into big trouble in the event of an IRS audit. Instead, you need to develop an organized system of filing and storing receipts and other documents. One of the best ways to do this is via your small business bookkeeping software solution; most of the major solutions on the market today will actually let you scan receipts and attach them to a transaction within the software itself.
  4. Update your books daily. On a daily basis, you need to enter expenditures and income. Skipping even a single day can mean playing catchup. The most significant advantage of updating your books on a daily basis, however, is that things don’t fall through the cracks. It’s easy to lose certain deductions, for example, or to forget where a particular purchase took place. Daily updates make tax season easier, and they give you real-time information about how your business is doing.
  5. Maintain security. The financial information stored in your bookkeeping software is valuable. In some cases, it includes confidential information. Make sure you don’t grant access to people that shouldn’t have it, and that you have passwords for any computerized accounting assets.
  6. Know when it’s time to bring in an expert. Many small business owners will do just fine keeping their own books. If you run a business that doesn’t rely on inventory and doesn’t have more than a couple of employees, for example, you may not need outside bookkeeping or accounting help. However, if you have a complex business, you need an expert. Know when it’s time to let go of the bookkeeping function and entrust it to someone else.
  7. Regularly review your small business bookkeeping procedures with your accountant and tax adviser. The two people who will make the most use of your bookkeeping data are your accountant and your tax adviser. Your accountant will help you understand what all of your numbers mean, and where your business is headed. Your tax adviser can help you make a tax plan that will result in the highest possible deductions. These people (or this person, as is often the case) should be an integral part of helping you define your bookkeeping practices, and they should have regular access to your books.

Small business bookkeeping doesn’t have to be a major source of consternation for your business. Put some of these practices into place today, and you’ll find that you not only have a better idea of how well your business is running, but you’ll also benefit greatly when it comes tax time.

[IMAGE CREDIT: Some rights reserved by Jerry Bunkers]

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