These small business bookkeeping tips comes from Ed Becker of “Outsource Your Books”. Thanks Ed!
4 Bookkeeping Tips to Help Small Business Owners Stay Organized
From the very first day of your new small business, the accounting and bookkeeping procedures you adhere to can either help you stay organized or contribute to a feeling of chaos. These four simple accounting and bookkeeping tips are easy to implement and can help any new small business owner stick to the “stay organized” track:
1. Consult with your tax and legal advisors to create the proper entity type for your small business. There are many types (C Corp, S Corp, PLLC, LLC, etc.) and your advisor can guide you through the process of choosing. The key is to pick an entity type with the most tax benefits for your specific scenario while also ensuring you have the best legal structure to safeguard your assets.
2. Open a new business bank account (either in your business name or as DBA if you haven’t yet set up a completely separate entity). Use this account for all business transactions, and never for personal expenses. It is fine to fund this account with personal funds but, ensure that you or your bookkeeper tracks this accordingly in your accounting system.
3. If you plan on purchasing and using a corporate credit card for any of your business activities, open a new account or begin using an existing credit card account for business only. If you decide to use an existing credit card, stop using it for any personal purchases.
4. If you have certain expenses that can be split between business and personal (phone costs, internet usage, rent, travel costs, etc), carefully track each and determine a reasonable percentage that can be applied to the business. Talk to your tax advisor and make this decision jointly.
Keeping your business and personal expenses separate as you create a new business or continue in an existing business eases bookkeeping tremendously. Come tax time, you’ll find providing your accountant with the information he or she needs to prepare your taxes much easier. There are two additional benefits to segmenting your bookkeeping in this way:
1. It allows you to truly monitor the profitability of your business.
2. It protects you from issues that may arise during any state, federal or regulatory audit.
About the Author: Edward Becker, CPA, President of Outsource Your Books, LLC. Outsource Your Books provides professional outsourced bookkeeping services (link to http://www.osyb.com) to emerging, small and mid-size business. Questions? Contact Ed at (516) 393-5620 or email [email protected]
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