Bookkeeping Basics: Boring with Benefits
Entrepreneurs, by nature, are charged up and enthusiastic about running their businesses. Perhaps the last thing they want to think about is recordkeeping. How boring! Yet, how important!
It is a must to keep good books and records. Tracking your revenue as well as your expenses lets you know whether youâre making or losing money. It enables you to prepare financial statements that may be needed for loan applications or other reasons, and recordkeeping is required for tax return preparation. Hereâs what you need to keep in mind:
Decide how youâll keep records.
Today most small business owners use software or online accounting solutions for recording income and expenses. There are many easy-to-use no- or low-cost options.
Youâll need to keep receipts, invoices, canceled checks and other paperwork to support tax deductions claimed on your return (the IRS provides guidance on record keeping in Publication 583
. Whether you use expandable folders or scan paper receipts into your computer, make sure your system protects the records and allows for easy retrieval.
Set up a separate business bank account.
Donât co-mingle your personal affairs with your business finances; youâll complicate your record keeping and probably miss out on tax deduction opportunities. Also, itâs a good idea to obtain a credit card used solely for your business.
Youâll want your recordkeeping tasks to become routine. Setting aside time on a regular basis to record your income and expenses will help establish good recordkeeping habits. Or you may want someone to do this for you (an employee or an outside bookkeeper/accountant).
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