The best-run small businesses keep track of these 6 things!
Whether you are doing your own books or you have a bookkeeper doing them for you, there are a number of things you, as the business owner, should always keep organized.
1. Receipts
I know, I know. Receipts are the worst. They are small, get lost easily, and can be so vague with descriptions on what you purchased! But receipt management is so, so important when owning a business! My number one tip for receipt management is to write a little note directly on the receipt what you purchased or what your purchase was for. Do this right when you get back in your car, or when you get back to your office or house. That way you won't have to think back a month (or God forbid, a whole year!) to remember what you purchased. We've all been there - looking at three identical receipts from the same business, and not remembering which one was this project and which ones were for that project. Don't be that person anymore! Beyond writing on your receipts though, the most efficient way to keep receipt records is by using your accounting software, like Quickbooks Online or Xero. You can either scan your receipts or simply take a photo of each receipt and upload them to the correct expenses in the accounting program. That way they are easy to find, and your tax accountant will be extra appreciative come tax time!
2. Bills and Invoices
Bills and invoices are essentially the same thing, but each term is used depending on who you are asking - the customer or the vendor/client/company. They both describe a product and/or service that has yet to be paid. Which means it is up to you to keep track of them, and make sure you make your payments on time or that you are getting paid on time! I recommend using your accounting software to track your bill pay and invoicing. However, if you don't use your accounting software, have a solid system in place. You don't want to be late on your payments and you don't want to lose track of money that others owe you!
3. Income
How do you collect payments on the goods or services you provide? Cash? Checks? Credit card payments? Paypal or Venmo? The income you make on your business is so, SO crucial to track. This is half of the equation to see if your business is actually making you any money, right?! Whether you are using accounting software or a trusty ol' spreadsheet, every dollar you earn needs to be recorded. Do you sell products that you are also collecting sales tax? Then you need to keep record of those numbers as well, and be paying your quarterly taxes. Or do you offer contracted services in your small business? You most likely aren't collecting taxes from your clients/customers on those services. However, you will be paying taxes on that income. My rule of thumb is to estimate about 30% of your earned income from contracted services will be owed back to the government in taxes. Make it a habit to set about 30% of every payment you receive aside, so you don't even have to think about it at the end of the month. Most likely 30% will be a little high, but it's better to be prepared than not, right? Plus, it will probably help you build a nice little nest egg to pay for a large expense for your business down the road (once your taxes are accounted for, of course)!
4. Mileage
Unless you have a vehicle that is used solely for your business, you are probably driving your personal vehicle for business purposes. If you are self-employed, a 1099 (contract) worker, small business owner, or even a freelancer, this applies to you! Did you know keeping track of the miles driven (in your personal vehicle) for your business can potentially lead to a decent deduction on your taxes? To stay organized, create a log in a spreadsheet or in a notebook kept in your car. For each business trip, write down the date, miles driven, the place(s) you drove to, and the purpose of your trip. This even includes just running to the store to pick up supplies! But again, this only applies to miles driven for BUSINESS purposes.
5. Asset Depreciation
First, let's break down those two terms. Assets are items of value owned by a company. They can be physical, tangible goods, like real estate, vehicles, office equipment, and furniture, or they can be intangible items, such as intellectual property. Depreciation refers to the process of reducing value of an asset over time, due to its age, wear and tear, or decay. Depreciation also refers to the process by which a business writes off the cost of a capital asset. Why do you need to track this, you ask? Because asset depreciation is an annual tax deduction, which reduces your overall tax burden. (Woo hoo!) However, not all assets can be depreciated. Land is a perfect example, since land is not subject to wear and tear. Inventory also cannot be depreciated, since you have it just for the purpose of selling. Assets that can be depreciated include buildings, vehicles, computers, office equipment, furniture and other fixtures, and even intangible things like patents. While you could figure out a depreciation schedule on your own with a little internet research, I highly recommend having your tax accountant help you.
6. Payroll
If you have people who work for your business, they probably want to get paid! Whether you hire 1099 contract workers or actual W2 employees, having a solid payroll system in place is key to running a successful business. First and foremost, I always recommend my bookkeeping clients pay the little bit of money per month for a payroll service. They are worth their weight in gold when it comes to figuring out how much you owe for taxes, plus making sure your taxes are paid on time. A payroll service does all the heavy lifting for you, and you are just responsible for entering the hours worked for each employee at the end of each pay period. But if you would rather do it yourself, staying organized and on top of tax due dates is KEY in proper payroll management. Not to mention, paying your employees on time every pay period.
While there are many, many things a business owner is responsible for, these are just a few on the “do not forget!” list. Are you at the point of, “Ok, I know I need to keep track of these, but what does that actually look like?” Having systems in place to keep these elements in your business organized is just as important as actually selling your product or service. Need help setting up a solid system? Shoot me an email and we can work together to set you up for success!
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