Small business owners—including female entrepreneurs—often feel intimidated or overwhelmed by the accounting/bookkeeping side of running a successful business. Still, properly keeping track of your finances can help you save money on your taxes, reduce the chance of an audit, decrease financial stress and help you make more informed financial decisions.
1. Keep your business and personal finances separate.
With small businesses, especially ones just starting out, it can be easy to blur the line between personal and work expenses, but this is a dangerous practice. Establish a business checking account and sign up for a business credit card or debit card and be meticulous about not mixing with your personal accounts.
2. Document everything surrounding income.
What if you provide a client a service and they don’t pay you? You need to have formal contracts that are properly signed and dated prior to starting any work, and a paper trail of work that you’ve done, hours logged, deliverables that you have provided, email exchanges, etc. Save all these files in an organized system so you can quickly and easily find any information you might need for a specific project. When you receive a check (if you aren’t using direct deposit), be sure to immediately record that you have received it and deposit it into your business account.
3. Record expenses and keep receipts.
Certain business expenses can be written off at tax time, but only if you can show how the money was spent. Record any expenses as soon as you make them, and save the receipt. There are receipt scanner apps you can get for your phone that make saving and recording receipts as easy as taking a photo. Ideally, you may want to keep hard copies of receipts as well as digital back-ups. Storing important files on the Cloud is generally considered more secure than saving files to a hard-drive that could crash.
4. Consider bookkeeping software.
Some small business owners do fine tracking their finances through Excel, but there are also a number of inexpensive accounting software solutions available that can help automate or simplify processes. Some software offers features that allow you to analyze profits and losses, integrate with a receipt scanner, or track payments, credit cards and business accounts in one handy solution. Research options and choose a solution that best fits the needs of your particular business.
5. Don’t wait.
Bookkeeping can be pretty easy if you record everything as it happens. If, however, you wait and do it once a year, it can be an overwhelming and harrowing task. You may look at a receipt from 6 months ago and have no idea what project it was associated with or what it was for. Work on managing your finances year-round, and have an organized system in place to keep you on track.
Finally, if finances just aren’t your thing – that’s okay. Delegate your bookkeeping to an employee or freelancer, and consider enlisting an accounting professional at tax time. Financial management is important to the success of your business, so make sure you do it right.
At Valley, we’re here to support female entrepreneurs and professionals get to the next level in business. Sign up for our Women in Business program, open a Women in Business Checking account , learn about available SBA loans , or visit our Business Insight Center for more helpful advice.