7 Bookkeeping Habits for Small Businesses
July 22, 2024
Maintaining accurate and up-to-date bookkeeping is essential for the success of any small business. As a small business owner, it's crucial to develop good bookkeeping habits to ensure the financial health of your company. Here are seven essential bookkeeping habits that every small business should adopt:
- Regularly update financial records: Avoid the last-minute rush by making a habit of updating your financial records on a consistent basis, whether it's daily, weekly, or monthly. This will help you stay on top of your finances and make informed decisions.
- Separate personal and business finances: It's important to keep your personal and business finances completely separate. This will make it easier to track expenses, generate accurate financial reports, and ensure compliance with tax regulations.
- Reconcile bank accounts monthly: Make it a habit to reconcile your bank accounts on a monthly basis. This will help you catch any errors or discrepancies early on, preventing larger issues down the line.
- Review accounts receivable regularly: Stay on top of your accounts receivable by reviewing them regularly. This will help you identify any late payments or outstanding invoices, allowing you to take prompt action to collect the owed funds.
- Set aside a portion of income for taxes to avoid surprises. Similar to having an emergency fund, this will help you to make sure you can cover your tax payments without having to resort to borrowing.
- Use accounting software to streamline bookkeeping processes. If you’re small enough, you may be able to do your books on excel or with receipts, but most small businesses should have accounting software that matches their needs.
- Track all expenses to maximize tax deductions. If you’re already practicing habits 1 thru 6, this should be happening. However, it’s worth a special mention here!
By adopting these seven bookkeeping habits, you'll be well on your way to maintaining a strong financial foundation for your small business, allowing you to focus on growth and success. At LOV bookkeeping, we work with small business owners to make sure they have these processes in place and they are being followed. We can take care of the heavy lifting here while you focus on doing the things that help grow your business.
Growth is the goal. More customers, more revenue, maybe your first few employees. It is exciting, and it is also the moment when many business owners discover that the way they have been handling their books no longer keeps up. The setup that worked when you were a solo operator doing a hundred transactions a month starts to strain when you are doing five times that with a team. The good news is that this is predictable, which means you can build for it before it becomes a problem.
We are halfway through the year. That makes July a good time to stop and ask a simple question: is your business actually on track for what you wanted in January? Most owners set goals at the start of the year and then put their heads down and work. That is not a criticism. It is what running a business looks like. But six months in, you now have something you did not have in January: real numbers. A mid-year checkup is just taking an hour to look at them while there is still time to do something about what you find.
Most business owners we talk to assume catch-up bookkeeping is the budget-friendly choice. Let the books sit, hand off a pile of statements once or twice a year, and pay for a single cleanup instead of an ongoing service. On paper that sounds reasonable. In practice it usually costs more.