It’s a ton of fun. Right?
Unless you’re an accountant and love numbers like me.
And as if you don’t have enough on your plate as a small business owner… I’m going to tell you that you MUST do something?
Yup… I am. And here goes.
The top 3 things you MUST do…
at least when it comes to bookkeeping and small business finances.
Bookkeeping Basics for Small Business Owners #1
Open A Separate Bank Account
Do yourself a huge… HUGE favor and open a separate bank account! I mean, immediately.
Here’s a little bit of the reasoning behind my rationale:
For practical reasons, you started a business… now act like you are in business!
From a business, accounting and practical perspective, it’s just easier to keep business and personal separate.
It’s easier on you from a tracking perspective, your accountant will definitely thank you and things won’t get all jumbled up in your mind making it a practical choice.
TIP: DO NOT pay personal stuff from your business account…that will only get you into hot water later.
BONUS TIP: Open your business account at the same bank where you have your personal account.
This will simplify things a bit and you only have one place to go to when/if you need to actually go to a branch to take care of any banking or talk to someone.
Bookkeeping Basics for Small Business Owners #2
Keep Track! Do your bookkeeping! Note: If you’re not sure what bookkeeping is, check out this post here.
Actually keeping track of your business expenses and income is a lot easier when you have a separate bank account (see tip #1).
You want to review every transaction and take note of them (put them into categories) at least once a month… while you still remember what the transactions were for and while you still have time to dispute a charge with your bank (if necessary).
TIP: Schedule time on your calendar to get this done! I do this at least once a week for my business and so far all of my clients do too.
Categorizing your transactions at least once a week save you time because you don’t have to try to remember what the transactions were for.
BONUS TIP: If you take the time to put this on your calendar (for instance, every Monday morning), make sure that this time you spend on your business in non-negotiable.
Once you get into the habit, you will start to get into the groove and you might actually start to like bookkeeping just a little bit.
Bookkeeping Basics for Small Business Owners #3
Set Boundaries for Yourself (aka a budget)
I know, I keep talking about budgets but they are important. To me, they are very important to the success (or failure) of your business.
If you don’t know what the game plan is, how can you execute it? Meaning, if you don’t know what your business’ expenses are, how do you know what the minimum amount of income you need to break-even?
AND not only should you have a budget, you should check your actual performance against it. How did you do? Is your budget too aggressive? Do you need to redo it (or reforecast your projections)?
Remember, a budget is simply a goal dressed up in dollar signs.
Best Practices for Small Businesses?
Would I consider these best practices? Yes! Absolutely!
Would I consider these tools to follow consistently? Again… Yes! Absolutely!
These three “must-do”s for your business will not only help you monitor where you are, but they will also help you GROW your business.
Once you have successfully and consistently kept track of your income and expenses (tip#2) in a separate business account (tip #1)… your budget will become a better tool for monitoring the success of your business and predicting future success or pitfalls before they come up (tip #3).
Because you will be able to pinpoint the strengths and weaknesses of your business, you will be able to point out, for yourself, where you should probably place more effort… and where you should probably not place effort.
So, go on. If you haven’t done these three things already, do yourself and your business a huge favor and get to it. Seriously. I wouldn’t steer you wrong.
Until next time,
PS. If you would like more information on bookkeeping and accounting, what it is and how it’s done around these parts… leave a comment below or come join my free FB community. I would like to hear from you.
Notes & Links:
Editor’s note: This post was originally published in June 2013 and has been completely revamped and updated.