Are you paying yourself enough?
The average small business owner makes about $70,000 a year. However, some owners choose to forego a salary for the first few years, in hopes of boosting their company’s earnings. Whereas other owners take way too much money.
To find your salary sweet spot, you’ll first need to determine what your annual business earnings and expenses are. Next, choose a salary that’s large enough to cover your personal expenses, and lifestyle, without setting your company back financially.
Are you ready to learn more helpful bookkeeping tips and tricks? Then this article’s for you! Read on to learn 5 small business bookkeeping practices.
1. Separate Business and Personal Finances
For starters, you need to begin separating your finances from your company’s finances. That’s why your priority should be to open a checking account that you’ll only use for business. You’ll also need to look into opening a business savings account. In the savings account, you can begin squirreling away a percentage of your company’s earnings.
Next, start recognizing the difference between personal and billable expenses. Billable expenses are the costs your company incurs while doing business. Whereas, your expenses are the things you buy for yourself, like groceries, or books.
Do you plan on using your money to fund a business expense? If yes, then make sure you keep track of all the invoices and receipts surrounding the purchase.
While business owners should receive a portion of the company’s earnings as a paycheck, you must go about taking your money the right way. For instance, some business owners complicate their finances by making multiple personal withdrawals each week. Instead, you should keep your accounts nice and tidy by paying yourself one set sum of money, on the same day each week.
Online Banking Works Best
Next, on our list of bookkeeping tips, we suggest finding a banking institution that offers user-friendly online access. Bank accounts that offer online accessibility are usually compatible with bookkeeping software. Instead of having to wait for your bank to post your statement, you’ll be able to reconcile your finances daily.
2. Choose a Quality Bookkeeping Software
Now, it’s time to talk about how to choose the right bookkeeping software. If you don’t want to waste countless hours trying to reconcile your accounts yourself, you’ll need to invest in reliable bookkeeping software. Szweda Consulting suggests that Quickbooks is the best choice when it comes to bookkeeping for small businesses.
If you’re unfamiliar with Quickbooks, or just want to get better at using it, you can reach out to consulting companies for training. Oftentimes accounting and business consulting firms are capable of providing training for bookkeeping software, payroll, and more.
3. Don’t Forget About Sales Taxes
Sales tax is just one of the many taxes small business owners are responsible for. The state you operate out of will use your sales tax to pay for things like roads, and public safety features. If you live in a state that has a sales tax, and you sell a taxable product or service, you have to collect from your customers.
Register for Sales Tax Permit
Before you can collect sales tax from your customers, you’ll need to apply for a sales tax permit. Does your business operate in more than 1 state? If yes, you’ll need to register for a permit in each state individually.
To register you’ll need your business address and employee identification number or EIN. When you’re done registering, you’ll get a sales tax ID that you have to use when you’re reporting sales tax.
In the beginning, you may find it time-consuming, determining the right sales tax calculations, and submitting your returns. However, as you become more familiar with the process, we promise it will get easier!
4. Payroll Bookkeeping Tips
Payroll is another process that gets easier for small business owners the more practice they get. Here are a few bookkeeping basics to help you become a payroll pro:
- Choose Your Pay Schedule Wisely
- Classify employees properly
- Double-check data entry
- Set a firm budget
- Stay up-to-date on labor laws
- Use a payroll software
First, you’ll need to decide what type of pay schedule will work best for your company. A bi-weekly pay schedule can be convenient since it means only having to do payroll twice a month. However, you should consider the lifestyle of your employees when choosing a pay schedule.
If employees have an unexpected expense, being on a bi-weekly pay schedule could cause them to struggle financially. We suggest scheduling a company meeting to get a feel for what the majority of your employees would enjoy as a payment schedule.
5. Go Cash Free
Moving on, you should consider making your company a cash-free business. Eliminating cash from the bookkeeping process will help save you a ton of time in the long run. Instead of having to deal with a register, or balancing a drawer, employees can enjoy the ease of handling electronic payments.
Cash also poses a risk, since having large amounts of money on-site makes it more likely that a robbery might take place. Another added benefit is that cash related employee theft will no longer be something you have to worry about.
Lastly, going cash-free can help improve the customer’s experience. Rather than waiting in a long line, they’ll be able to enjoy fast, efficient service. It’s also easier to track customer payments when they’re made with credit or debit cards.
Watch Your Company Thrive
Now you know some of the top bookkeeping tips, so your business can keep on thriving. Remember that the first thing you’ll need to do is separate your personal and business finances. Start looking for banking institutions that are local to you, and offer online access.
Next, visit a banking branch and set up your company’s checking and savings account! Lastly, pick what day you’ll withdraw money to pay yourself, and you’ll be good to go. For more insightful tips like these, read another article from our blog.