There are no shortage of details to consider when you’re a small business owner. To ensure that you receive the benefit of tax write-offs and deductions available to your company, keep a record of all debits and credits expenses. As a business owner, I carefully keep tabs on the financial health of all of my businesses. I believe that investing in excellent accounting shouldn’t be considered a cost but an investment that sets the company up for success. Subpar accounting can set one back financially in both the short term and the long term.
Free Course: Understanding Financial Statements
Small-business taxes vary between industries, states, and business types, so to get the best advice on what taxes your business needs to pay, consult with your accountant. For the most part, though, you’ll probably end up paying income taxes, sales taxes, and payroll taxes. If you set up your finances with accrual-basis accounting, you’ll record financial transactions when they occur, not when the money moves accounts. If you set up your finances with cash-basis accounting, you’ll record financial transactions when the cash moves accounts. It can be a good idea to use a business credit card, but don’t rely on it to make overdue payments or fund big purchases. Managing your small business’s finances isn’t just about crunching numbers—it’s about making data-driven decisions that keep your business healthy and positioned for growth.
- For the most part, though, you’ll probably end up paying income taxes, sales taxes, and payroll taxes.
- Without these systems in place, it’s all too easy to lose track of funds or create the financial records necessary to file taxes and apply for small business financing, if necessary.
- Alternatively, as you set up your accounting software, you should see a list of optional financial accounts for you to add to your chart of accounts and general ledger.
- Note that you may need to make quarterly estimated tax payments if you expect to owe $1,000 or more when filing your annual tax return.
- Do an inventory analysis to determine the value of items not sold.
Review long overdue receivables
Business owners often forget to get receipts for charitable donations. Although companies of specific structures, such as LLCs and partnerships, can’t claim charity contributions as business expenses, the owner often can. Ask recipients of in-kind donations for written confirmation of the time spent and use documentation to defend the fair market value of any property donations you make. Still, small business accounting can be a challenge for leaders without a financial background.
Track Expenses In Real Time
This will ensure you avoid late fees and keep your vendors happy. If vendors offer discounts for early payments, you may want to take advantage to reduce costs. The key is to ensure every transaction is recorded correctly and in the right account. Here are some basic steps to get you started keeping track of your small business’s financial information, generating financial statements, and filing taxes. As a business owner or financial manager, keeping your company financially fit is a constant challenge.
You can use an accounts receivable aging report for a quick view of outstanding customer payments. The beginning basic accounting principles of the month is a good time to send overdue reminder statements to customers, clients, and anyone else who owes you money. Cash flow management is critical and includes forecasting how much cash you will need in the coming weeks and months.
You’ll want to gather and record all your transactions, usually weekly, but you can do this daily or bi-weekly, depending on your volume. This includes recording revenue such as product sales and expenses like purchasing supplies. Computer upgrades, equipment replacement, and tax deadlines shouldn’t come as accrued liabilities a surprise. Larger capital expenses often come up during slower months so plan ahead to avoid a cash crunch. Also, keep a close eye on outstanding customer payments (a.k.a. accounts receivable).
All you have to do is scan the paper, check the details, then move on to the next one. Make sure to read online reviews, compare different pricing options, and see which features are included in the service. If you’re still feeling uncertain, don’t be afraid to speak with a professional bookkeeping service about securing their help.
You can even hire a virtual bookkeeper to do all your bookkeeping and accounting tasks while being located anywhere in the world. Note that you may need to make quarterly estimated tax payments if you expect to owe $1,000 or more when filing your annual tax return. If your business needs to charge and collect sales tax for the products you sell, you’ll likely need to make monthly payments to the appropriate state department. You’ll need to handle payroll withholdings and then report and deposit the payroll taxes, like Social Security, to the appropriate agencies on the required dates. A payroll service provider can do all this to save you time and ensure accuracy at a reasonable cost.