When starting a business, keeping up with and managing your business finances is one of those things you don’t think about, until you have to.
The financial aspect of it can be a bit daunting and confusing. Take business write offs. What can you write off especially if you work from home? Which is better to help manage your business expenses and taxes – a bookkeeper or an accountant? What is the best way to manage your personal finances vs. your business finances?
We’re going to clear some of the confusion while helping you save time (which is an entrepreneur’s most valuable asset) and hopefully money with these simple steps to managing your small business finances.
If you’re a sole proprietor and your business is not very complex, you may want to take a look at some of the DIY bookkeeping programs that are out there and see which is best for you. Some of the more popular DIY programs out there are QuickBooks, Freshbooks and the WaveApp by Wave Accounting.
Both QuickBooks and Freshbooks are very user friendly and will also help you get a good understanding of where you are with your income vs. expenses.
Another handy tool is the Wave App by Wave Accounting. Wave is a free, online software. Wave helps manage invoices, credit card payments, accounting & payroll.
If you are going to go the DIY route, here’s a quick tip for you. We all pretty much agree that bookeeping not only sucks, it can be a time suck as well. What you may want to do is pencil in approximately 30 – 60 minutes a week to organize and manage your small business finances.
When to hire a Bookkeeper
If you find yourself making a lot of transactions, this is where hiring a bookkeeper can come in handy. A bookkeeper can help keep you up to date and organized with all your transactions and can also help save you a lot of time.
Your bookkeeper can also work with your accountant to help file your taxes.
When to hire an Accountant
If your business is not a sole proprietorship and is more complex, you will want to look into hiring an accountant.
Regardless of what type of company you have (Sole Proprietorship, LLC, S-Corp, Inc.), you should have an accountant work with you to help file your taxes.
A good accountant can do more than just help you with your taxes. They can help identify areas in your business where you may be spending too much money and budget your expenses better so you can make more profit.
To help you understand what is tax deductible, that is another area where an accountant can help you. A lot depends on what type of business you have and what Country you live in. What may be a tax credit in Canada may not be in the US and vise versa.
For most small businesses, especially online businesses, your website hosting and internet service provider is definitely a business expense.
Training and education to improve your “money making skills” is a deduction including any travel expenses that are in direct correlation with your business.
You may want to book about an hour of time with an accountant to go over what you can and cannot deduct for your business. If you are working from home, you’d be surprised as to what you can actually deduct as a business expense that you may not be aware of.
Keep them separated
One of the biggest pieces of advice we can offer is to keep your business and personal finances separate.
You want to keep a separate business bank account from your personal bank account. You should have a credit card that is dedicated to your business expenses and another credit card dedicated for personal use.
When it comes to your bookkeeping and working with your accountant, when you keep things separate, it makes things a lot easier. Not separating the two muddies the waters and can make things very confusing and will end up costing you time and money.
So it’s very important that you do not mix the two together.
A great book we recommend that will help you to understand the numbers a lot better when it comes to small business business finances is called Simple Numbers, Straight Talk, Big Profits!: 4 Keys to Unlock Your Business Potential by Greg Crabtree. The book is written so that it’s easy to understand and simplifies everything you need to know when it comes to understanding your numbers.
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