One of the many hats that we wear as small business owners is bookkeeper, or financial manager. It is important to keep records of your finances when running a small business. Its always better to get in front of it during the year so that when its tax time you aren’t scrambling and feeling overwhelmed trying to put together 12 months worth of financial information in a small amount of time. I am going to explain how and what I do each month for the bookkeeping aspect of our small business.
First, it is very important that you are able to view your business transactions easily. For me, I wish I had known to get a business account in the beginning so that keeping up with business transactions would be easier than sifting through trying to see what is personal versus business. Opening a business checking account has been game changer. Now that I have that separate account I’m able to view a total each month of how much I spend on business expenses in a very easy way.
Each month I create a monthly P&L statement to find out what our profit/loss was for the month. This statement is what is needed at tax time but in the yearly form. It is much easier to take 12 months of P&L’s and create 1 yearly P&L versus franticly sifting through 12 months of transactions at tax time and creating your yearly P&L. Its also always good to know where you stand monthly versus waiting til the end of the year. Even if you don’t make a profit it is still a good idea to create one of these statements to track your spending and know where you stand.
On the P&L statement is where you can list all of your business expenses to get a good idea of your spending and also keep up with deductions such as internet, supplies, advertising, postage, etc. Its important to find out what all deductions you can claim from a tax professional to ensure your getting all the deductions you are allowed and don’t miss any.
Another program that has been helpful for me in keeping up with our finances has been Quicken. There are other programs out there that can help like quickbooks, or Hurdlr, its just one of those things you will have to try and see which one you like best and which fits your business needs the best. Quicken is linked to my business checking account and so whenever my business card is swiped it automatically connects with Quicken and records it there. At any point I can open up my quicken app and see a pie chart of our business spending and it will show me a breakdown of my spending, as well as the dollar amount for each category; i.e. supplies, postage, advertising etc. When its time to do our monthly P&L I open quicken and get my category spending from here. This makes it easier to record category spending on the P&L.
At the end of the day its always a good idea to stay on top of your finances but its very important to stay on top of your business finances. I am not a finance expert and do not claim to be, but I am sharing things with you that have helped me along the way, in hopes that this may be useful to you and your small business.
Comment below something that you would like me to discuss in a future blog.