One of the perks of owning your own business is authority. You run the show and can do so howsoever you please. For business owners this benefit can also be a curse. The creative minds of entrepreneurs often move quickly through ideas and decisions without pausing to set details in stone. The risk?-forgetting deadlines, neglecting meetings, veering of track on long-projects, and encountering the wrath of the IRS.
Avoid these costs by following these 5 bookkeeping tips, as originally outlined by Eileen P. Gunn for Entrepreneur.
1. Plan for major expenditures.
Why? Having funds set aside for upcoming expenditures allows you to know if you’re able to take advantage of business opportunities that pop up unexpectedly. Doing so also keeps you in the good graces of your bank, for you won’t have to beg for last-minute loans.
How? Use a calendar. Mark upcoming purchases and scheduled upgrades as soon as you know about them. And don’t let your 12 month edition limit you. Predict expenses 3-5 years in advance and record each in a space you’ll see.
2. Monitor expenses.
Why? You’ll maximize your tax write-offs.
How? Invest in a business-only credit card and pay for purchases solely with this. Doing so ensures you’ll have a paper record of all expenses that can’t be left in grocery bag or thrown absentmindedly in the trash. If you’re looking for another helpful and inexpensive investment consider using a planner. Whenever you head out for a business lunch of coffee break, jot down the expense. When tax season rolls around you can easily flip through the calendar year and catch all potential write-offs.
3. Record deposits correctly and consistently.
Why? Doing so ensures you won’t pay taxes on anything but income.
How? Put a record keeping system in place and stick to it. Be it a computer program, special software, or paper and pencil, it’s important simply that you use your chosen system regularly.
4. Set aside for tax season.
Why? You can incur penalties and be forced to pay interest if you file late.
How? Turn again to your handy calendar. Mark the tax deadline and select certain dates throughout the year at which you’ll set a portion of money aside. In addition to forcing you to stash some dough, these marked dates will keep you aware of the upcoming deadline.
5. Be attentive to your invoices.
Why? Paying bills late (or not at all,) negatively affects your cash flow.
How? Designate a person and a process. With a specific individual in your organization responsible for monitoring billing, you’ll always know where to turn if an issue arises. With a specific billing process that is made known to clients, you’ll be able to justifiably levy penalties and avoid conflict if and when late payments are made.
No time to handle this yourself? Contact one of our outsourced accounting and CFO services experts today.