7 Things You Should Know about Bookkeeping for Small Businesses

If you own a Mom-and-Pop store or a one-person business, you may wear many hats. One of those hats is likely to be your bookkeeping. While this is a task which is essential to the success of your business, it often gets pushed aside for more urgent issues. It’s not uncommon for small business owners to wait until tax time to attempt to get their bookkeeping in order. If this sounds like your situation, here are a few things you should know.

Know the Basics

You should always know how much money you expect to come in and go out for a given week. If you operate on a cash basis, this means how many customers you can expect during that time. If your customers pay on credit, you’ll want to figure which accounts are due each week. 

You’ll also want to think about bills coming due and when you must pay them. Don’t forget to include any cash you have on hand. This information will tell you if you have enough money to pay your bills or if you’re operating at a deficit for the week. 

Keep Records of Every Transaction

Most businesses will provide a receipt to customers for products sold or services rendered. However, if you’re just starting out, you may be more informal. Regardless of the type of transaction, you need to record it. You can buy a receipt book or even enter it in a spreadsheet. However, it’s best to start out with a software program that can grow with your business and start this practice from your very first sale. If you hire a tax preparer for tax season, they’ll thank you for being organized. 

Know When to Pay Vendors

You should create a file for each vendor and know when they require payment. Some will say payment due immediately while others will have 30-day or even 60 or 90-day terms. Know this information so you can avoid late fees or being cut off from an important supplier because you forgot to pay the bill. Review your unpaid invoices at least weekly so you don’t miss anything. 

Review Past-due Invoices for Customers

You should review your invoices at least once a month to see who hasn’t paid you yet. You may need to send out reminders or give someone a call. If you have a serious problem with people who pay late, you may need to consider incorporating a late fee policy. If you fail to do this step on a regular basis, you may discover invoices that are several months old and still unpaid. It will be harder to collect on those than if you had kept on top of it from the beginning. 

Review Supply and Demand

If you sell products, you’ll need to analyze your needs on a regular basis to account for busy seasons or overall growth of your business. You’ll also have to factor in how much cash you need to pay for additional goods. It’s important to do this at least monthly, so you’ll be prepared financially for any extra costs.

Know Payroll Requirements

You’ll have to pay your employees on whatever schedule you’ve set up. However, you have other payroll requirements which may not coincide with this timeline. You need to pay taxes on payroll at various times, so you should have that marked on your calendar. You can end up with stiff penalties if you’re late. This one task is often the reason small businesses hire accountants to handle their bookkeeping because of the laws around payroll taxes. 

Create a Budget and Manage Your Balance Sheet

You need to have a budget for your business so you always operate in the black. You also need to keep a profit and loss statement and balance sheet to review your business’ performance. These documents provide a clear picture of how you’re doing and what changes may need to be made. You need to review them regularly so you can prevent small issues from becoming big problems and to prepare for future growth. 

All these tasks are essential to keep your business on track. However, they can take a lot of time away from other jobs in your company. You may want to consider hiring a professional bookkeeper to handle the accounting part of your business so you can focus on other aspects.