Bookkeeping can be daunting, but it doesn’t have to be. When it comes to easy bookkeeping, the sooner you can get on top of it, the better. If you’re like most small business owners, bookkeeping is probably not your favourite task. It can be time-consuming and tedious, but it’s essential to keeping your business running smoothly. Fortunately, you can do a few things to make bookkeeping easier.
When you first started your creative business, I bet you were full of hope and inspiration. You had a vision of what your business was going to look like. Your thoughts were consumed with the creative side of things, and you probably weren’t thinking too much about bookkeeping or financial statements.
The problem is that business finances are not always the most enjoyable business activity if you are creative. However, ensuring you know your financial numbers is vital to running a successful, profitable business.
While keeping financial records might be boring, it is one of the best things you can do for your business. An easy bookkeeping system will make your life less stressful come tax time. Also, understanding your financial position will enable you to make better business decisions.
If you are just starting out or a seasoned small business owner, always pay attention to your finances.
Here are 3 tips to help make your bookkeeping easy:
1. Stay organised – Keep your accounts separate.
To make your records as straightforward as possible, ALWAYS ensure you have a bank account and credit card solely for your business.
Your personal and business transactions should be kept separate.
The bank account doesn’t need to be an ‘official’ business account. It just needs to be something that you use only for your business.
This is important because it is much easier to track your business finances if it is separate from your personal money.
To keep your business finances separate from your personal, the first step is to set up a bank account and credit card for your business activities.
Suppose you don’t want to set up a bank account in the name of your business. In that case, you can dedicate a personal account you already have for business activities. You could even use a credit card you already own as your designated business activity card. This scenario makes sense in the early days when you are getting started.
Whichever method you choose, you need a way to keep business transactions completely separate from your personal money.
This is the first step to good small business record keeping.
2. Keep track of receipts and invoices.
One of the best ways to make bookkeeping easier is to stay organised throughout the year.
For electronic receipts, file them in one place so they are easy to find. You can file them all in a single email folder or download them to a specific folder on your computer.
The same goes for your paper receipts. Keep all your receipts and invoices in one place, so you don’t have to waste time hunting them down when it’s time to do your books. If you want to be extra organised, keep a separate folder for each month and year. That way you can easily find information from previous years when you are preparing your tax return.
I put everything in a large envelope with the month and year written on it and then put that envelope in a box file for the year. It doesn’t need to be complicated.
You will also need to have access to your bank statements. As mentioned earlier, this can be a bank account in your personal name or a business bank account. Ensure you have access to your bank statements for at least 3 years (check with your country’s rules) after you file the related tax return.
Many tax agencies say that the burden of proof is on the taxpayer to prove their income and expenses. So, keeping thorough records is very important!
3. Automate what you can for easy bookkeeping
The last step to make for easy bookkeeping is to use an accounting or bookkeeping tool. These tools will help you organise your transactions and manage your books. But, again, they don’t need to be complicated. The best bookkeeping software is the one that makes it easy for you to keep track of everything.
There are many online accounting program options available; most have a monthly cost, the price of which varies. Most can also be set up to automatically import your bank transactions which is a huge time saver.
But, if you don’t want to have a monthly cost, then I have created an easy bookkeeping spreadsheet specifically for Etsy sellers. It works for all small businesses but has the added bonus of managing your data from Etsy. Simply download two monthly files from Etsy and copy the data into the spreadsheet. Then watch all your data magically appear in the reports/dashboards. Your Etsy financials are recorded in no time, and you can see how much profit you have made.
If you are an Etsy seller, there are some specifics you might be interested in. Here is a series of posts to help you get on top of your Etsy financials to work out your Etsy earnings and the Etsy seller fees you will be charged.
- How much does Etsy cost?
- What do Etsy’s revenue figures mean?
- How to know if you are really making a profit on Etsy
By following these tips, you can take control of your bookkeeping and avoid feeling overwhelmed.
Reviewing your finances will help you make wise financial decisions for your business.
Having your record-keeping done at the end of the year will allow you to quickly complete your tax return, or hand the information over to your tax accountant.
By being proactive about your business record keeping you will save yourself many hours of stress and aggravation.