You’ve just launched your new business. Income starts coming in, expenses start going out, and before you know it, the first year is over and it’s time to report to Uncle Sam. Suddenly, you’re scrambling through receipts and bank statements, trying to piece everything together. It’s a time-consuming and stressful process, especially with tax day fast approaching. In the excitement of growing your business, it’s easy to overlook this unglamorous but essential part of entrepreneurship. Don’t let that happen. Even if your business isn’t making money yet, it’s almost certainly incurring expenses. Putting simple systems in place from the start will save you time, stress, and costly mistakes later on.
Every business is required to keep their financial information accurate and up to date. This is not only useful for tax time, but also for your own growth. So let’s get started the best way possible.
Businesses that are just starting out don’t require software or complicated formulas to get accurate books. All you need is a dedicated bank account and a credit card.
With the easy steps I will share with you here, you will be in a much better place when tax time comes around.
Step 1: Dedicated checking account
On your first year in business, open a basic checking account – a free one that I like is bluevine. This is where you will put in any cash you invest into your business, and this is also where you will get paid in and spend from. If you can only open a personal checking account at this time, that works too. Just make sure that only business related transactions are in this account.
Step 2: Dedicated Credit Card
Apply for a basic credit card like Capital One Business. If you need to subscribe to any software like Google Workspace or Windows office – it is good to use a credit card. Not only will this help you better track your expenses, but it will also help you build your business credit score. Many of these basic credit cards have great benefits too. Just make sure to pay it off every month.
If you can’t get a business credit card just yet, you can use a personal one as long as you only use it for business purposes. Remember, keeping personal and business expenses separate is crucial. Don’t let this one slide. As a bookkeeper, I can tell you it’s going to cost you more time, headache and money to sort this out after the fact.
Keep it simple, and don’t commingle your expenses.
Step 3: Have a consistent process for your accounting activities
You don’t need to work on your books every day – that’s what bookkeepers do. You will have few transactions to handle and taking a look at them once every 2 weeks will be enough to keep things on track.
Choose 2 days in a month – for example, the 10th and the 25th. Pay your bills and take a look at who owes you money and may need a friendly reminder.
Having a consistent schedule, will help you always be on time with your bills and ensure no invoices are falling through the cracks.
Step 4: Reconcile your accounts
This is the process of comparing records you logged into you accounting software (or spreadsheet, it could also be receipts) against your statement. The statements always have to match the logs you create. If the balances are different, you need to find an explanation for it and adjust your records. By doing this process monthly, at the of the year you will know for sure that everything has been accounted for, there is nothing left to remove or add. If you use quickbooks or other accounting software this process is usually super simple.
By having this process in place when you first start out, you will have a strong foundation to move on to more complex accounting systems like Quickbooks. You will know it’s time to move to some sort of accounting software when handling your accounting twice a month is no longer helping you keep on track. If you are spending many hours a week working on just the accounting portion of your business, that’s your sign to upgrade.
Bookkeeper recommendation
As a bookkeeper, I recommend signing up for QuickBooks (or any accounting software you prefer) right from the start. Begin with the most basic plan and upgrade as your business grows. Setting up your bookkeeping system early will save you countless hours and headaches down the road. Keep in mind, there is a learning curve and too many mistakes can create a mess that’s costly to fix later. If you decide to handle setup on your own, proceed with caution. Investing in professional help at the beginning is a justifiable expense and far more affordable than paying someone to clean up errors later on. For perspective, setting up your QuickBooks and providing you with basic guidance typically costs on average $500, clean ups on the other hand start at $1600 and can go above $10,000.
If you are interested in more detailed content on setting up Quickbooks, let me know. I create content based on questions I receive from business owners.