Five Bookkeeping Tips for Entrepreneurs
I. Plan for Major Expenses.
Your less likely to miss business opportunities or have to apply for a loan when known expenses become due. The IRS can charge penalties and interest for not filing quarterly tax or returns on time.
Recommend: Put events like a major computer upgrades, equipment, taxes and lease agreements on the calendar a year in advance or, ideally, three to five years ahead. Recognize the seasonal ups and downs. Systematically put a portion of money aside throughout the year for taxes. Then note tax deadlines on your calendar, along with prep time if you need it, to make sure you actually make payments when they're due.
II. Track Expenses.
You might miss tax write-offs and may lose out on others.
Recommend: A credit card that you use solely for business. If you always use your business credit card for business expenses, you're less likely to pay cash and lose the receipts, forfeiting tax-time write-offs. Credit cards companies help businesses track expenses.
III. Record Deposits Correctly.
You will be less likely to pay taxes on money that isn't income.
Recommend: Implement a system for keeping your financial activities straight, an Excel spreadsheet or software such as QuickBooks. Business owners typically make a variety of deposits into their bank account through the year, including loans, revenue from sales and cash infusions from their personal savings. At the end of the year, you might erroneously record some deposits as income, and consequently pay taxes on more money than you've actually made.
IV. Monitor your Invoices Closely.
Late and unpaid bills hurt your cash flow.
Recommend: Assign someone in your organizations, or hire a trained bookkeeper to track your billing. Then put a process in place for issuing a second invoice, making a phone call and perhaps charging penalties such as extra fees at certain deadlines
Recommend: Have a back-up resource:
a. Cash Reserve Account
b. Empty Credit Card
c. Line of Credit