This past Tuesday, Tom spoke at the Tuesdays Together meet up in DC. One of the topics he covered during his presentation was methods for keeping good records, especially related to your business finances. Today, I'm going to share some of the tips that he covered at the meeting. Hopefully, these will help you get a handle on your bookkeeping, and if you have questions, we are here to help!
Reconcile bank accounts, credit cards and Paypal
On a monthly basis, you should reconcile your business bank accounts using your bank statements. Also, don't forget to reconcile any business credit cards and Paypal. Paypal can often be overlooked, but you need to ensure that those payments and processing fees are captured in your books.
Track true revenue less fees, not net amount
When tracking your revenue from sales using Paypal or even credit cards, be sure to track your revenue less any processing fees. For example, if you had a $100 sale and $4 was deducted for processing fees, make sure you enter $100 in revenue and $4 in processing fees as expenses, instead of entering just $96 in revenue. If you don't do it that way, you lose the ability to track processing fees and you are understating your revenue.
Avoid using cash for business purchases
When you use cash for making business purchases, you don't typically have any electronic record of the transaction -- either on your bank account or credit card statement. You will have to keep track of those cash receipts and enter them manually into your bookkeeping software. It's easier for tracking purposes to just stick with a debit card or credit card for purchases.
Find a bookkeeping software (Quickbooks, Wave, etc.)
There are a variety of bookkeeping software options available to small businesses. Tom prefers to use Quickbooks Online or a desktop version of Quickbooks. But, I do know that a lot of creative businesses prefer to use Wave or Xero. The important thing is to make sure it has the ability to let you reconcile your bank accounts. In the long run, it's best to just choose the one that appeals to you most and start using it regularly.
Set aside money for taxes
Be sure to set aside money each month for your quarterly and yearly tax obligation. It's much easier to save a little at a time throughout the year, than to worry and stress about having to come up with a large sum of money when April rolls around. Many businesses have the amount of money they should set aside calculated by their CPA. This amount is based on their performance the previous year. If you are experiencing significant growth or decline, contact your CPA and have these amounts recalculated so you don't have any surprises at tax time.
Let us know if you have any specific questions we can answer. Also, if you are feeling a little overwhelmed with your bookkeeping or need help getting your books in order for taxes, please contact us.
Written by Allison Barnhill, co-founder of Business by Barnhill