Small Business Bookkeeping & Accounting 101: 10 Steps to Get Your Company on Track
If you’ve just launched or are going to launch your online store, congratulations! It takes remarkable passion and constancy to get to where you are today.
However, as you most likely are aware, business ownership is a constant flood of fulfilling milestones combined with expanding to-do lists. With your launch, you’ll have to get on top of the accounting tasks that come along with owning a store.
This list of small business accounting steps will provide you the confidence to realize you’ve covered your bases, and are prepared to move on to the next item on your business to-do list.
- Open a bank account
After you’ve legitimately registered your business, you’ll need someplace to stash your business revenue. Having a different bank account keeps records particular and will make life easier come tax time. Note that partnerships, LLCs, and corporations are lawfully required to have a different bank account for business. Sole proprietors don’t lawfully require a separate account, but it’s definitely suggested.
Start by opening up a business checking account, and afterward any savings accounts that will assist you to organize funds and plan for taxes.
- Track your expenses
The establishment of solid business record keeping is figuring out how to track your expenses viably. It’s a critical step that enables you to build financial statements, monitor deductible expenses, prepare tax returns, monitor the growth of your business, and support what you report on your tax return.
Directly from the beginning, you ought to set up a system for organizing receipts and other significant records. This process can be basic and old school.
There are three sorts of receipts that you should pay additional attention to:
- Meals and Entertainment: Conducting a business meeting in a restaurant or cafe is an incredible choice, simply be sure to document it well. On the back of the receipt, record who attended and the reason for the meal or outing.
- Vehicle-related expenses: Record where, when, and why you utilized the vehicle for business, and then apply the percentage of utilization to vehicle-related costs.
- Home office receipts: It is similar to the vehicle expenses, you have to count what percentage of your home is utilized for business and then apply that percentage to home related costs.
Beginning your business at home is an incredible way to keep overhead low, in addition to you’ll qualify for some unique tax reductions. You’re ready to deduct the portion of your home that’s utilized for business, just as your internet connection, and transportation to and from work sites and for business tasks.
- Develop a bookkeeping system
Before we jump into establishing a bookkeeping system, it’s useful to understand precisely what bookkeeping is, and how it varies from accounting. Bookkeeping is the day-to-day procedure of recording transactions, categorizing them, and accommodating bank statements.
Accounting is a high-level procedure that looks at business progress and makes sense of the information compiled by the bookkeeper by building financial statements. As a new business owner, you’ll have to figure out which bookkeeping method to utilize:
- You can go the DIY route and use software like Wave or Quickbooks. Alternatively, you could utilize a simple Excel spreadsheet.
- You have the alternative of utilizing an outsourced or part-time bookkeeper that’s either cloud-based or local.
- When your business is big enough you can hire an in-house bookkeeper and/or accountant.