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Regardless of the size of your office or whether you employ someone, for tax purposes you are still considered a business owner. As such, you will need to keep careful records of your income and expenses.

In addition to saving money as tax season approaches, keeping clear and concise records of all your business transactions will give you a clear overview of which business activities are paying off and where you may be able to cut back. costs to improve your income.

Of course, you can hire an accountant to handle this for you, but even so, it’s important to have at least one basic understanding best practices in accounting and bookkeeping. So if you’re a brand new small business owner, here are some quick tips to get you started.

1. Separate your personal finances

If you run a relatively small business and aren’t yet making huge profits or even paying yourself a salary, it can be tempting to merge your business and personal finances. In fact, research shows that one in five business owners make the mistake of using the same bank account for their personal and business transactions.

However, having a separate business account will make it much easier to keep accurate records, take advantage of tax cuts, and apply for credit cards or secure a loan using your business name. Keeping things separate can also help protect your personal credit score and your assets if your business runs into trouble afterwards.

2. Plan for all major and recurring expenses

While it is likely that you will have unforeseen expenses from time to time, you should have a clear idea of ​​your major and recurring business expenses. This allows you to create an annual budget and also set aside enough money to cover your recurring business expenses at least a month or two in advance.

Top expenses to plan for when you start out include one-time business purchases such as a new computer or essential office furniture. Recurring expenses are those that keep coming back, like utilities, rent, insurance, travel expenses, and marketing expenses.

Business owners need to have a clear picture of their major and recurring expenses. (Photo by sirastock via Shutterstock)

3. Schedule time for bookkeeping on a monthly basis.

Another common mistake new business owners make is not organizing their bookkeeping on a weekly or monthly basis. They are then faced with the colossal task of making sense of all the receipts and business transactions accumulated over six months or more.

So rather than letting everything pile up and promising yourself that you will eventually get there, make your accounting a priority by setting aside at least one day per month entirely dedicated to putting your accounts in order.

4. Develop a reliable accounting system

Even if you hire an accountant to handle most of your bookkeeping; the job of bookkeeping, which is to record your daily business transactions and reconcile bank statements, will most likely still fall on you. So you will need to develop a reliable accounting system and stick to it.

To make it easier for you, you might want to invest in accounting software that will help you with tasks like invoicing, time tracking, and expense management. Examples of programs you might consider include QuickBooks, Xero, and FreshBooks.

5. Understand your tax obligations

Since you’ll need to set aside enough money for your taxes each month, it’s important to understand your tax obligations and any deductions you might be claiming. As a small business owner, you are also legally required to keep business records for five years or more, so finding a reliable system to maintain and back up your records is important.

Government websites are a good source of advice and information on the documents you will need to keep. But, when in doubt, it’s always a good idea to hire a knowledgeable accountant who will be able to advise you on your rights and obligations as well as the tax requirements and deductions that apply to your particular situation.

(Featured Image by Zadorozhnyi Viktor via Shutterstock)

DISCLAIMER: This article expresses my own ideas and opinions. All of the information I have shared is from sources that I believe to be reliable and accurate. I did not receive any financial compensation for writing this article, and I do not own any shares in the companies I mentioned. I encourage any reader to do their own diligent research before making any investment decision.

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