Bookkeeping: The Art of Not Screwing Yourself Over
Let's be honest—nobody starts a business because they love bookkeeping.
Except for us, of course.
Running a business means that you need to cover all of the bases, and cover them well. Finances are tedious, even for the passionate, and they often get put off... and off...
Whether you sell handmade perogies or run a nonprofit, the fastest way to go from "small business owner" to "former business owner" is to ignore your books.
Let's go over the basics so you don't end up running out of gas in the middle of the woods.
The Most Common Bookkeeping Mistakes: Seeds of Regret
Poor financial management doesn't usually blow up in your face right away.
Financial mismanagement sows the seeds of disaster for future you.
Bookkeeping is about more than just tracking your money. Well-kept books are your road map—a clear picture of where you are now, and the twists in the road ahead.
Let's look at the most common mistakes that will make your life miserable:
❌ Mixing Business and Personal Finances
If you think you can save time by putting all your finances in the same place, congratulations! You just won a tax time nightmare!
In the early days of your business, it might even seem like a good idea when there isn't much to deal with... yet. I promise you that molehill will become a mountain.
Always use separate accounts for business and personal.
❌ Ignore Your Receipts
Five dollars for coffee supplies. Two bucks for pencils. A twelve-dollar one-time service purchase.
Don't be fooled—every single receipt is important. Scan them, file them, and keep them available.
You will need those for deductions and especially for audits. Be ready before you need to be.
❌ Waiting Until Tax Season to "Figure It Out"
I just said it, but it bears repeating: be ready now instead of trying to get ready in a panic.
Your business won't stop when you have an emergency, and most emergencies can be avoided with due diligence.
❌ Profit Time Means Party Time
Just because the books look good this month doesn't mean it's time to spend like there's no tomorrow.
There is a tomorrow. And many more after that.
Cash flow matters more than revenue—but we'll go over that in the next post in this series.
Simple Habits to Save Tomorrow
Now that you know how you can ruin your future for yourself, let's look at some ways you can do tomorrow you a few kind acts:
✅ Reconcile Accounts Weekly
It's easier to spot mistakes when you get into a rhythm with your accounting practices.
Plus, you get good at whatever you practice, and maintaining your finances is one heck of a good skill to build.
✅ Use Accounting Software
The go-to "solution" for many new business owners is a spreadsheet with a simple table full of business transactions. This is too simple unless you are a seasoned expert at both building and using financial tools.
Fleshed-out solutions already exist for your bookkeeping needs. Get yourself some bookkeeping software, like Quickbooks, and let it do the heavy lifting.
✅ Set aside tax money in advance
A good rule of thumb to avoid owing your firstborn to the government: set aside 20-30% of every payment. As far as you're concerned, it doesn't exist.
Put your tax buffer in a bucket and be ready for when the tax(wo)man comes a-calling.
✅ Know when to call a pro
Don't wait until your car catches fire to call a mechanic. Stay in your wheelhouse and focus on your specialty, and get the right people for the many branches of your task tree.
Better to have a professional keep your finances in the right order. Get some light assistance now, not emergency evac later.
The Bottom Line
Good bookkeeping isn't about loving spreadsheets, it's about keeping your business alive and thriving. The best time to develop good business practices is right from the very beginning, not when you're panicking at year-end.
Next time we'll take a look at cash flow—because making money and keeping money are two very different things.
Written by Lyle Mustard
Post image sourced from http://www.freepik.com/
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