Overcoming Bookkeeping Challenges as a Small Business Owner
When preparing to start a business, you hopefully focused on the good things to come. Maybe you kept your eye on the prize and imagined the possibilities of financial stability and work flexibility, or maybe you loved the idea of doing something related to your passions every day. Unless you have a background in accounting and financing, you probably chose to compartmentalize the fact that keeping records would be a central part of your life while operating your business. Bookkeeping can take a huge amount of time and effort for small business owners, but here are some ways you can overcome those challenges.
Working With Tax Professionals
One of the most important things you can do as a business owner is to start working with tax professionals early. Figuring out the taxes that your business owes can be extremely complex. The laws and regulations around business taxes are not transparent, and it can take days, even weeks of research to understand how to identify different types of income and expenses so that your taxes are accurate.
There’s also the possibility that you might be able to take advantage of tax incentives or even tax credits. What you need is a person or a company who can help you navigate tax law and the various incentives at both the state and federal levels. A professional can tell you how to apply for ERC and how to leverage different aspects of running your business to get tax breaks.
Creating Consistent Procedures
To prevent dealing with costly bookkeeping mistakes at the end of the tax year, make sure to create consistent documentation procedures and a proper accounting workflow as soon as you can. Start by separating your personal finances from your business transactions. If you are a sole proprietor, this might seem like overkill, but it is one of the first basic steps you need to take if you want to keep track of your business finances correctly. Some other procedures you can implement are:
- Enforce internal checks and balances
- Reconcile your transactions and accounts weekly or monthly
- Keep hard copies of transaction receipts in a central and safe location
- Record all required employee data and keep it up to date
- Back up your accounting records or use the cloud
Embracing Accounting Software
While it’s tempting to try and save as much as you can on overhead, consider using accounting software for your bookkeeping needs. Not only will the software allow you to keep track of your business transactions all in one place, but it will also help you visualize your cash flow and tax liability in real time.
In today’s market, you have a lot of options to choose from when it comes to digital bookkeeping. You can choose as many or as few tools as you think you will need and use. If you’re a sole proprietor, you won’t need software that includes payroll or employee benefits and spending, unless you want to track what you spend on yourself.
Don’t hesitate to invest in a program that gives you access to the cloud. When your accounting software lives in the cloud, it means you can record transactions and do basic bookkeeping tasks from anywhere, using a mobile app. You’ll also have instant and regular backups so that you never risk losing critical data.
Hiring an Experienced Accountant
Once your business expands to a certain level, you should make it a priority to hire an experienced accountant. Having an accountant as part of your team will make life so much easier for you, and it will help you reduce bookkeeping errors while also improving the financial stability of your business. Accountants have the training and education necessary to help you adjust your cash flow predictions so that you can make more accurate decisions regarding your business finances. Ultimately, this person will benefit your business in more ways than one.
Remember that it is completely valid to feel overwhelmed when looking at your business finances, but you don’t have to face those obstacles alone. Reach out to professionals and start getting your processes organized, and you’ll be in the clear in no time.
