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Being a small business owner is tough enough without having to worry about bookkeeping on top of everything else. However, ignoring your bookkeeping can come back to bite you down the road. That's why we've put together this quick and easy guide to help you get started with bookkeeping for your small business.
Bookkeeping is the process of tracking and recording all of the financial transactions made by your business. This includes everything from income and expenses to sales and purchases. Keeping accurate records of all your financial transactions is important for a number of reasons.
For one, it helps you keep tabs on how much money is coming in and going out of your business. This information is critical for making sound financial decisions about your business.
Bookkeeping also provides a valuable paper trail that can come in handy if you ever find yourself in a legal dispute or facing an audit from the IRS. Having accurate records of all your financial transactions makes it much easier to defend yourself against any allegations of wrongdoing.
Last but not least, keeping accurate bookkeeping records can help you spot trends and patterns in your business finances. This information can be used to make informed decisions about where to invest your money or how to cut costs.
Now that we've answered the question, "what is bookkeeping," let's take a look at some of the basics of small business bookkeeping.
There are a few key things you need to know about bookkeeping for your small business:
Keep track of your income and expenses – This seems like a no-brainer, but it's important to keep track of both your income and your expenses. Your income includes anything that your business takes in, such as money from customers or sales. Your expenses include things like the cost of goods sold, inventory, rent, insurance, etc. Keeping track of both will give you a clear picture of your business's financial health.
Separate personal and business finances – This is one mistake that many small business owners make. It's important to keep your personal and business finances separate so that you can easily see how much money your business is making (or losing). The last thing you want is to mix up your personal and business expenses and end up in hot water come tax time.
Get organized – In order to keep track of your income and expenses, you need to be organized. That means setting up a system (manual or digital) that works for you and then sticking to it. Whether it's a simple spreadsheet or something more complex like QuickBooks, find a system that will help you stay on top of your bookkeeping.
Stay on top of invoicing – Another important part of bookkeeping is invoicing. When you make a sale, be sure to send an invoice to the customer as soon as possible. This will help you keep track of what's owed to you and ensure that you get paid in a timely manner.
Understand the basics of taxes – Last but not least, it's important to have a basic understanding of taxes. This doesn't mean that you need to be an expert, but you should have a general idea of what kinds of taxes apply to your business. This way, come tax time, you won't be caught off guard by any surprises.
Bookkeeping might not be the most glamorous part of running a small business, but it's definitely one of the most important. By following the tips above, you can set up a system that works for you and helps you keep track of your business's finances.
If you need help getting started, there are a number of bookkeeping software options available (both paid and free) that can make the process easier. And if you're still feeling lost, consider hiring a bookkeeper or accountant to help you get on track.
National Legacy Capital Group specializes in providing working capital loans, business lines of credit and equipment finance to small businesses across the United States. We understand that access to capital is often the biggest obstacle preventing entrepreneurs from achieving their dreams. That's why we're committed to helping small businesses get the funding they need to grow and succeed.
For more information about our products and services, please visit our website or give us a call today. We look forward to helping you achieve your business goals!
