To help small business owners maintain accurate and organized financial records, we reached out to experts in various fields for their top recommendations. From automated bookkeeping solutions to utilizing financial record-keeping software, here are six best practices shared by growth directors, attorneys, and CEOs alike.
- Automate Your Bookkeeping Solutions
- Maintain Business-Personal Asset Separation
- Track Income and Expenses Regularly
- Use Double-Entry Bookkeeping
- Organize Receipts and Invoices
- Utilize Financial Record-Keeping Software
Automate Your Bookkeeping Solutions
To save time and eliminate paperwork, consider using one of the many available automated bookkeeping solutions. Using an automated system ensures that your books are always up to date and allows you to access your information from any device, at any time. Automated bookkeeping also streamlines the process of preparing your taxes at the end of the year.
There are several accounting software options available in the market, such as QuickBooks, Xero, and FreshBooks. This software comes with various features that can help you streamline your financial record-keeping process.
Span Chen, Growth Director, Notta
Maintain Business-Personal Asset Separation
Entrepreneurs often flock to the limited liability company (LLC) structure for liability protection and flexibility in taxation. Unfortunately, some small business owners fail to maintain a separation between business and personal assets.
Every small business should obtain an employer identification number (EIN), open a business checking account, and open a business credit card as soon as feasible. Failing to observe these essential formalities can be a costly mistake. Moreover, ensure you have a separate accounting instance for each business. This basic practice can make record-keeping a less daunting task and help ensure you recognize the benefits intended by the LLC structure.
Derek Colvin, Attorney, Waldrop & Colvin
Track Income and Expenses Regularly
One best practice for financial record-keeping for a small business is to track income and expenses. To make the process simpler, this should be done on a daily or weekly basis—keeping accurate records of all payments and deposits as they come in, as well as regular outgoings such as rent and bills.
A common way to do this might be to compile all transactions into an online spreadsheet program like Microsoft Excel—with incredibly powerful sorting features, it can provide an easily editable digital record of your finances with the added benefit of easily viewable trends.
Julia Kelly, Managing Partner, Rigits
Use Double-Entry Bookkeeping
Double-entry bookkeeping is a proven method for organizing financial transactions in a small business. This system ensures that every financial transaction is recorded in two accounts: a debit account and a credit account. The debits and credits must always be equal and opposite, providing a clear audit trail.
This method helps ensure accuracy in financial record-keeping, avoiding any discrepancies, and simplifying tax filings. It can also help owners to better understand their financial situation and make informed decisions. Double-entry bookkeeping requires discipline and accuracy, but it provides a solid foundation for a small business’s financial stability.
Tarun Saha, Co-founder and CEO, StallionZo
Organize Receipts and Invoices
One best practice for financial record-keeping for a small business is to keep all receipts and invoice documents in an organized manner.
This could mean maintaining files on paper or electronically, depending upon the size and number of transactions that the business engages in. Small businesses should also use accounting software to keep track of expenses, income, and taxes.
Adil Advani, Marketing Director, AnySoftwareTools
Utilize Financial Record-Keeping Software
Using technology is ideal for financial record-keeping for a small business as it can automate the record-keeping process, bringing more agility and precision to information.
For example, using financial record-keeping software—free or paid—can meet this demand well for small businesses. During every day, week, and month, new information will come for record-keeping, coming from different sources. Using spreadsheets ends up being tiring and wastes time with constant updates.
On the other hand, financial record-keeping software already has functions that can be customized as per business need, which gives them an upper edge for keeping all the financial information well-aligned and accessible anytime.
Bill Natividad, Head of Operations, Finty