Unless you love working with numbers or you are an accountant, bookkeeping is perhaps not your favorite task. But adopting a few good habits early on can help you avoid costly errors when it comes to record keeping. You most likely keep a lot of the financial details of your business in your head. It is understandable to do it this way; you will not need to learn new software so there is no danger of a system crash that loses all your data.
However, if you do not have a system and processes in place, unpleasant surprises can pop-up, goals can be missed and important paperwork forgotten. Getting a better handle on your money can help you make and keep long-term goals, smooth out the seasonal ups and downs of your cash flow, and even improve your profits. It can also help you stay out of trouble with the IRS.
1. Plan For Major Expenses
Be honest about the expenses that could be coming up in the next one to five years. It is important to acknowledge the seasonal ups and downs of your business, and how they will affect your ability to spend during those times. By ensuring that you have forecasted for major updates, or peaks in staffing costs, you will avoid taking money out of the company during the good months and finding yourself short during the slow months.
2. Track Your Expenses
Expenses can be hard to track, so you may be missing tax write-offs that you could have benefited from. To help prepare for audits, it is also useful for you to make notes in your calendar of the clients you are meeting for each of those lunches and events. This will help substantiate your expenses for your tax records, should you be audited. This goes for car mileage as well. Keep track of your mileage whenever driving long distances for meetings.
3. Record Deposits Correctly
Whether it is a pocket notebook and pencil, an Excel spread sheet, or financial software, make sure that you keep track of what is being deposited into your business bank account. You are likely to make various deposits throughout the year, from loans to sales revenue to cash infusions. If you cannot account for where each of these deposits comes from, you are leaving yourself open to paying taxes on money that is not income.
4. Set Aside Money For Taxes
You know that you are going to have to pay taxes and you know when. So systematically put money aside for it. Unpaid taxes can incur penalties and interest from the IRAS, so make sure the money is there when time comes that you will need it by putting money aside every month. Or every time a contract is paid, it will come as less of a sting when they are due.
5. Keep An Eye On Your Invoices
Late and unpaid bills can hurt your cash flow. Assign someone to track your billing, and then put a process in place for when a bill is not paid. This can be issuing a second invoice, making a phone call, or even levying penalties at certain deadlines. Make a plan for clients who are 30, 60 or 90 days late. Remember that every late payment is an interest-free loan that hurts your cash flow.
Indeed, bookkeeping can be a very tedious job. If you do not want to spend your days hunched down in front of paperwork, hire reputable tax services Joplin to do the job for you. This way, you can better focus on growing your business and possibly expand it.