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I remember the day that I started my first Etsy shop to sell my art prints and originals- I had no clue what I was doing! I just jumped right in (which is sometimes the only move many of us make!), and I didn’t know how to run a business or how to keep your books for a small business. Bookkeeping and accounting basics were like a foreign idea to me. Being disorganized, though, can lead to disaster, and it’s so important for small business owners to keep track of the financial goings-on of their business throughout the year. Failing to file your taxes properly is definitely a scary thought, but on top of that not keeping your books can lead to losing your business money and being unable to pay bills or for materials.
Here are a few points to remember when keeping your books for your small business:
Keep receipts for every payment to and from your business. I would recommend starting a physical file folder of your receipts per year, and if you have a lot of electronic receipts, printing them or start a complementary folder of receipts on your computer. Separate business and personal expenses.
Keep a ledger of these receipts to keep track of everything. I keep mine in a Google Docs spreadsheet, but there are accounting platforms out there that you can use as well, such as FreshBooks which I recommend below. This makes it easy for me to access my records from my phone or any computer. In this ledger you will want to record each transaction that passes to and from your business, so that you can balance it like you would a check book.
From Linda Pinson’s book “Keeping the Books: Basic RecordKeeping and Accounting for Small Business”
Balance your ledger on a consistent basis. You may not want to or have time to do this every time there is a business related transaction, but you can schedule when you’ll be balancing your ledger – whether it be weekly, biweekly, monthly, etc. This will give you a sense of your cashflow and perhaps areas that you can cut back on to save money. It will also give you a sense of when your busiest, most successful times of the year are for your business so that you can know what to expect and set some goals. Balancing your books will help you respond in smart ways to unexpected changes as well.
Understand that it’s ok to pay a professional! Professional accountants or bookkeepers will know about potential deductions that you might be eligible for, or other loopholes, and they’ll make sure everything is up to date and accurate in case you’ve missed something.
Paying taxes for your small business, its revenue and services or products bought from others that support your business, is important.
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Recommended Accounting Software
I recommend Freshbooks because they are very small business friendly! FreshBooks was designed specifically for small business owners and the self-employed to save them time and money. They also have a Free 30 Day Trial currently running – click here to try it out!
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