Entrepreneurs keep plenty of the financial details of their business in their heads. Doing so has its advantages: No new software system to learn, no danger of a system crash that loses all of your information, and you’ll be able to tweak your budget as often as you wish without sitting down at a desk.
Here are four bookkeeping tips for entrepreneurs.
1. Keep a detailed Eye on your invoices.
Why it’s helpful: Late and unpaid bills hurt your income.
What to do: Assign somebody in your organization to trace your billing. Then place a method for issuing a second invoice, making a telephone call and perhaps levying penalties like additional fees at certain deadlines.
Some entrepreneurs believe that after they’ve sent out an invoice, they’ve taken care of billing.
“Every late payment is an interest-free loan and hurts your income.“
2. Record deposits Properly.
Why it’s helpful: You’ll be less seemingly to pay taxes on cash that isn’t financial gain.
What to do: Adopt a system for keeping your financial activities straight, whether or not it is a notebook you utilize systematically, an excel spreadsheet or software system such as Quickbooks. Business homeowners generally build a range of deposits into their bank account through the year, including loans, revenue from sales and cash infusions from their personal savings. The difficulty, is that at the end of the year, you or your accountant may mistakenly record some deposits as financial gain, and consequently pay taxes on more cash than you have really earned.
3. Plan for major Expenses.
Why it’s helpful: You are less likely to miss business opportunities or ought to scramble for a loan once the expenses become unavoidable.
What to do: Place events sort of a major laptop upgrade on the calendar a year earlier or, ideally, 3 to 5 years ahead. Acknowledge the seasonal ups and downs, one thing several entrepreneurs are reluctant to try and do.
“This helps you to be honest regarding the fact that it’s coming back and plan for it.”
You’ll avoid taking cash out of the company throughout the flush periods only to seek out yourself short in the slower months, when expensive projects like upgrading computers or replacing factory components usually happen.
4. Set aside Cash for paying taxes.
Why it’s helpful: The Internal Revenue Service can levy penalties and interest for not filing quarterly tax returns on time.
What to do: Systematically place a portion of cash aside throughout the year for taxes. Then note tax deadlines on your calendar, beside preparation time if you need it, to make sure you actually make payments when they’re due.
“Payroll taxes that go unpaid may be especially problematic.”