How to Organise Small Business Bookkeeping Wth These 10 Practices

Imagine you’re a small business owner. You’ve worked hard to launch your dream company and are excited to watch it grow. But as your business starts to take off, you get buried under the weight of your success. You can’t keep up with your business's increasing demands, especially regarding bookkeeping. The disorganised mess of receipts and invoices is costing you time and money. If only you could eliminate this stress and return to your work! Learning effective practices for organising small business bookkeeping can help you get back on track. And hiring a bookkeeper can help you get there faster. This blog will explore the benefits of hiring a bookkeeper and how to organise small business bookkeeping with these practices.

At Haven, we help owners tidy up their bookkeeping by providing reliable accounting services for small businesses. Our team can help you catch up, organize your financial data, and develop a system for maintaining your books going forward. 

Why Do Small Businesses Need Bookkeeping?

Running a small business can be chaotic. You must juggle various responsibilities and balance ever-changing priorities. While managing your company's finances may not be at the top of your list, it should be. Accurate bookkeeping helps you make sense of your business's financial situation. This, in turn, allows you to make informed decisions and avoid potential pitfalls. 

Organized Records Mean Better Business Decisions

Small business owners need to know how much money flows in and out of their companies, as well as the sources and destinations of these funds. Bookkeeping helps business owners track the frequency of payables and receivables and discern other patterns that impact operations. 

For example, suppose your company relies on multiple vendors for a particular product. In that case, organised bookkeeping can help you compare costs to determine if you can reduce expenses by consolidating your orders. If disputes arise, documented evidence obtained through bookkeeping can help you resolve the matter quickly and efficiently. 

Keeping Payroll Straight

Payroll is likely one of your small business's most significant expenses. Unlike paying vendors or buying supplies, payroll isn't just a matter of cutting checks. Remunerating your staff accurately can be a complex exercise. When applicable, you must hold back federal and state taxes, unemployment and workers' compensation insurance, health and dental coverage, retirement account deductions, vacation pay reimbursements, and stock/ownership contributions. 

Keeping track of these figures requires meticulous checks and re-checks and rigorous notations for the record. A knowledgeable bookkeeper's chart of accounts helps manage these myriad numbers and serves as a necessary record if an employee contests a paycheck. 

Using Sound Figures for Budgeting

Every business worth its salt works from a well-devised budget. The prerequisite for any budget discussion is a timely awareness of income, spending, and assets. With precise numbers to work from, company leadership can decide about future investments, purchases, raises, and other expenditures. 

It can also resolve whether to increase its compensation from clients or customers. Nevertheless, none of these conclusions are made in a vacuum, as factual numeric information must buttress the financial decisions of every small business. Such data is compiled through bookkeeping. 

Getting a Better Handle on Cash Flow

Without an intimate knowledge of the dynamics of your cash flow, every slow-paying client and quick-invoicing creditor becomes an occasion for anxiety, and it can be a tedious and monotonous task. Quarterly tax estimates come due, and the rent increases, each adding to the stress level. 

With proper cash flow management, when your books and ledgers are up to date and systematised, there are fewer question marks to worry about. You know the funds that are available and where they fall short. The news is not always good, but at least you know it. 

Getting Ready for Tax Season

Tax planning can vex and intimidate owners, but accurate bookkeeping can help with everything, including the tax filing process. The maze of:

• Dedications
• Credits
• Exceptions
• Schedules

Of course, penalties are enough to surrender to the IRS without a body of well-organised documentation supporting your claims. 

This is why a dedicated bookkeeper is invaluable to a small business and is worth his or her weight in gold. Receipts, names, and dates back up that business dinner deduction. Those charitable contributions are all enumerated and accompanied by information on the charity and its payment information. Having this information in order and close at hand lets you easily file your tax return. The federal government doesn't mess around when it's time to file taxes. 

Protecting Against the Internal Revenue Auditors

As many know, a business can do everything right and still be subject to an IRS audit. In this case, bookkeeping helps. Your business return makes claims and representations, and the audit aims to verify them. 

Good bookkeeping is all about connecting the dots between those representations and reality. When auditors can follow the information on a ledger to receipts, bank statements, and pay stubs, to name a few documents, they quickly learn of the competency and integrity of the business organisation. IRS audit services assist businesses in gaining that reputation. 

Setting Goals and Reaching Them

In the same way, haphazard bookkeeping adds to stress and anxiety, it also blinds business owners to the potential they can realise in the long run. You are hard-pressed to set a destination without the information to see where you are. 

Only with understandable, detailed, and factual data can a business owner or management team plot a course for future success. 

• Will you need more staff?
• Can you afford more staff? 
• Will you need financing? 
• What is your debt situation now? 

A contemporary arrangement and distillation of cash flow, assets, and obligations is key to setting a path forward.

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How to Organize Small Business Bookkeeping Wth These Practices

1. Get Familiar With Financial Statements

Small business bookkeeping starts with understanding the basics, namely, the three core financial statements: 

• The balance sheet
• Income statement
• Statement of cash flows

These documents provide a window into your financial health so that you can make informed decisions and track performance. 

2. Keep Personal and Business Finances Separate

Mixing personal and business finances is a recipe for confusion and legal issues. Do yourself and your CPA a favour by keeping separate accounts and carefully tracking expenses. This simplifies bookkeeping and taxes and helps in accurate financial analysis.

3. Set Up a Business Checking Account

From the moment your business starts making money, you need to separate the personal from the business structure of your finances. Track expenses and profits, and sort it between personal and company accounts. Doing so makes it easier to come tax time and helps you keep your finances friendly and organised.

If you have an EIN, you can open a business bank account or just open a separate personal bank account and treat it just as you would a business account. All business income should be filtered through this account; all expenses should be paid through that account. Use a business credit card to keep transactions to that one account. This way, each month you will receive a bank statement to help you track your cash flow.

4. Understand Your Cash Flow

Keep a close eye on your cash flow to ensure you have enough liquidity to meet your short- and long-term obligations. By regularly reviewing your statement of cash flows, you can anticipate and address any potential shortages.

5. Automate Bookkeeping Tasks with Software

Put invoices, expense tracking, and payroll on autopilot with financial management software. This way, you can reduce errors, save time, and focus on running your business.

6. Build Your Business Credit Score

Establish and maintain a strong business credit score by paying down debt and avoiding high-interest rates you can’t afford. With a good credit score, you can secure financing to grow your business when and how you want.

7. Invest in Growth

With proper financial management, you can allocate funds to invest in growth, whether by reinvesting profits or taking on strategic debt. You can take on new projects, buy necessary equipment, or hire new talent.

8. Streamline Tax Payments

Don’t wait until the end of the year to manage your taxes. By switching to quarterly or monthly tax payments, you can avoid financial stress during tax season and maybe even reduce your tax burden with deductions and credits.

9. Monitor Your Books Regularly

Keeping a close eye on your financial records to ensure accuracy and flag any irregularities is essential. Set aside a regular time to check your general ledger so nothing falls through the cracks, and you can adjust it as needed.

10. Establish Financial Protocols and Plans

No matter how small your business is (yes, even you solopreneurs), developing and enforcing your financial protocols and plans can lead to better financial management habits and protect your business from potential risks. Protocols include setting and sticking to a budget, monitoring cash flow, and reviewing expenses carefully. 

Haven: Comprehensive Financial Management for Startups

Let your business take flight while Haven manages your financial runway. Built by founders for founders, we handle everything from daily bookkeeping to complex tax filings, R&D credits that put cash back in your pocket, and fractional CFO services. 

Join 400+ startups who've saved millions in tax credits, countless hours of administrative work, and never missed a filing deadline - all while accessing 24/7 Slack support from CPAs who understand the unique challenges of growing businesses. 

Book a call today to learn how our dedicated team can help you focus on building rather than bookkeeping.

5 Common Small Business Bookkeeping Mistakes To Avoid

1. Poor Record Keeping: How to Keep Your Books Up to Date 

Many businesses are guilty of not keeping proper track of their receipts and expenses. It's easy to misplace receipts or forget those little expenses you feel won’t matter in the long run. As a result of this, your books won’t match what you’ve provided and spent. This will then directly affect the tax you’re due to pay at the end of the year, leading to an inaccurate judgment of your finances. 

To combat this, more frequent record updating is required. We advise that you update your books every month. That way, you’re not trying to rack your brains for that lunch you put on the company credit card months ago. A proper system from month to month will save you time and money in the long run. 

2. Not Having Separate Bank Accounts: Why You Need to Keep Business and Personal Finances Separate 

Trying to operate your business with the same bank account for personal and business activities only results in one outcome: “problems”. It can be hard to distinguish between personal and business transactions, so things can easily slip through the net and get missed. 

Having separate accounts allows you to see where the transactions belong and spot errors and potential issues early.

3. Not Backing Up Your Records: How to Avoid Losing Important Financial Data 

If any technical issues arise and you end up losing your records or unable to access them for a while, you need a backup to rely on. That's why it's good practice to back up your systems regularly. You don’t lose any potential work and can continue working normally if you face any issues.

4. Poor Organisation: Why You Need to Get Your Bookkeeping Files in Order 

Organisation and a proper filing system are basic best practices of formal bookkeeping. How can you expect to stay on top of your books without strict organisation? You can’t. Accurately tracking income and outgoings by categorising them ensures that you’re always in the best position to have a firm grip on your financial position. 

Also, it means that you can have an accurate representation of whether your business is on track or problems need addressing. A neat filing system is so simple to put in place. The main issue, though, is laziness and not sticking to it. Make sure you persevere with it and don’t file things everywhere. That way, you won’t lose or misplace anything of importance. 

5. Not Using the Right Software: Choosing the Best Bookkeeping Software for Your Business 

Bookkeeping software is there to make your life easier, but you need to ensure you’re using the right one. Many businesses use price as a deciding factor, but just because the software is mega expensive doesn’t mean it will be the right one for your business. 

Nor is the cheap option that can save you money the one you should opt for. Many app-based bookkeeping software packages offer different price tiers, which allow you to customise your subscription with the features you will need the most. This means that you can choose just the features that you need.

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9 Tools To Help With Small Business Bookkeeping Tasks

1. Haven: A Small Business Bookkeeping Partner That Grows With You 

For small business owners, managing finances often feels like a full-time job that takes time away from running the business. That’s where Haven steps in. Explicitly designed for founders, Haven takes on the daily financial tasks that can otherwise pile up, from routine bookkeeping to complex tax filings. 

Haven supports small businesses by offering: 

• Day-to-day bookkeeping to keep your financial records accurate and up to date 
• Tax filing and R&D credit services that help you stay compliant and potentially recover money you're entitled to 
• Fractional CFO services to guide financial strategy and decision-making as your business scales 24/7 
• Slack support with experienced CPAs who understand the fast-paced nature of running a business 

With more than 400 startups already on board, Haven has helped companies reclaim hours of admin time, avoid missed tax deadlines, and access millions in tax credits. Whether you're just getting your books in order or preparing for growth, Haven’s dedicated team gives you the confidence to focus on your business, not the back office. 

2. Xero Accounting Software 

Let’s begin with a name synonymous with modern bookkeeping Xero Accounting UK. This cloud-based accounting software has redefined the way businesses handle their financial records. Xero’s AI-driven features offer a fresh perspective on bookkeeping by automating critical tasks. One of its standout features is its advanced bank reconciliation capabilities. While other software may offer basic reconciliation features, Xero takes it further by automating the process. 

This means that matching your bank transactions with your financial records becomes a breeze, minimising the risk of errors and ensuring impeccable accuracy in your books. But that’s not all Xero’s AI-driven expense categorisation is a real game-changer. It takes the manual effort out of categorising expenses by doing it automatically. This saves you time and guarantees consistent accuracy in your records. 

3. QuickBooks Online 

QuickBooks Online is another heavyweight in the world of bookkeeping. While it may not have the same level of advanced bank reconciliation as Xero, it still offers efficient features that streamline the process. This ensures that your financial records remain perfectly harmonious with your bank transactions, keeping your books accurate and up-to-date. 

Similar to Xero, QuickBooks Online embraces AI to automate expense categorisation. This automation reduces manual effort and minimises the chances of categorisation errors. Regarding your financial records, accuracy is paramount, and QuickBooks Online delivers on that front. 

4. FreshBooks 

FreshBooks takes a slightly different approach to bookkeeping, focusing on user-friendliness. Its interface is incredibly intuitive, making it a top choice for small businesses and freelancers. Tasks often considered tedious, like invoicing, expense tracking, and time management, are all automated in FreshBooks. This saves time and provides business owners with in-depth insights into their financial management through cohesive reports. 

While it may not have Xero's advanced bank reconciliation features, FreshBooks simplifies these essential processes for small businesses. Accuracy is maintained, and you can trust that your financial records align seamlessly with your bank transactions. 

5. Zoho Books 

Zoho Books is versatile and an excellent choice for businesses with evolving needs. It simplifies the fundamental functions of bookkeeping while providing the flexibility to adapt as transaction volume grows. 

While its bank reconciliation features are standard, Zoho Books offers reliable automated expense categorisation. This ensures that your expense tracking remains accurate and hassle-free. However, like some other options, it lacks Xero's cash flow predictions. 

6. Sage Business Cloud Accounting 

Sage Business Cloud Accounting takes simplicity to the next level for small businesses. Its AI-powered expense tracking and bank reconciliation features provide valuable insights that aid financial planning and management. 

Sage Business Cloud Accounting doesn’t offer cash flow predictions like its counterparts. However, its intuitive interface makes it accessible to users of all backgrounds, ensuring that small businesses can confidently manage their finances. 

7. KashFlow 

KashFlow brings its unique flair to bookkeeping, leveraging AI to streamline tasks such as invoicing, expense tracking, and financial reporting. This is particularly valuable for start-up owners seeking a fuss-free bookkeeping experience tailored to their needs. 

While it may not offer advanced bank reconciliation features, KashFlow’s focus on automating tasks sets it apart. It suits start-ups and small businesses seeking a straightforward bookkeeping experience. 

8. Less Accounting 

Less Accounting grew out of frustration at the types of financial management software available on the market. While Less Accounting software lacks QuickBooks Online’s elegance and features, it isn’t trying to compete with QuickBooks. 

Instead, Less Accounting considers it an alternative for businesses that only need the most basic accounting features: income and expense tracking, invoices and proposals, mileage tracking, reports, and double-entry accounting. It also offers integrations with financial institutions. 

9. Kashoo 

Kashoo was created when founders Dobes Vandermeer and May Chu decided to create a simpler solution for small business accounting. Kashoo aims to be simple. It provides basic accounting features and wants to make it simple for business owners to manage the accounting themselves. 

They offer features like bank imports, reporting, invoices, expense reporting, cash flow, payroll integrations, tax reporting, and data exports. It is the perfect software for businesses that do not need inventory management within the software.

Book a Call to Learn More About our Accounting Services (Trusted by 400+ Startups)

Haven is a bookkeeping service that focuses on startups and small businesses. They offer various services to help manage your financials so you can focus on growing your business. Their team includes CPAs who understand the unique challenges of startups. They can help you save money with tax credits and ensure you never miss a filing deadline. 

You can get support from them via Slack 24/7, and they also offer fractional CFO services. 

Join 400+ startups who've saved millions in tax credits, countless hours of administrative work, and never missed a filing deadline. Book a call today to see how Haven can help your business.

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