Print Page   |   Contact Us   |   Your Cart   |   Report Abuse   |   Sign In
News & Press: Arizona Business News Updates

Five Bookkeeping Tips for Business Owners

Wednesday, October 12, 2011   (0 Comments)
Posted by: Rhette Baughman
Share |
Adopting some good habits can help stave off costly errors when it comes to record-keeping.

Entrepreneurs keep a lot of the financial details of their business in their heads. Doing so has its advantages: No new software to learn, no danger of a system crash that loses all your data, and you can tweak your budget as often as you need without sitting down at a desk.

But when you don't have a system and some processes in place, unpleasant surprises can pop up, goals can be easily missed and important paperwork forgotten. Getting a better handle on your money can help you to make and keep long-term goals, smooth out the seasonal ups and downs of your cash flow and maybe improve your profits. It can also help you to stay out of trouble with the Internal Revenue Service.

Here are five bookkeeping tips for entrepreneurs.

1. Plan for major expenses.

Why it's helpful: You're less likely to miss business opportunities or have to scramble for a loan when the expenses become unavoidable.

What to do: Put events like a major computer upgrade on the calendar a year in advance or, ideally, three to five years ahead. Acknowledge the seasonal ups and downs, something many entrepreneurs are reluctant to do.

"This helps you to be honest about the fact that it's coming and plan for it," says James LeMay, a director with the accounting firm Daigle & Associates in Boston.

You'll avoid taking money out of the company during the flush periods only to find yourself short in the slower months, when costly projects like upgrading computers or replacing factory components usually happen.

2. Track expenses.

Why it's helpful: You otherwise might some miss tax write-offs and may lose out on others.

What to do: A credit card that you use solely for business can be a basic accounting system, says Raffaele Mari, an accountant in Newport Beach, Calif., who teaches a financial course for entrepreneurs at Pepperdine University.

Most card statements categorize expenses, so you can see which outlays relate to which business activities.

If you always use your business credit card for business expenses, you're less likely to pay cash at, say, Staples and lose the receipts, forfeiting tax-time write-offs. Pens and printer paper can add up. Additionally, Mari says, routinely jot down business trips, lunches, coffee dates and other events with cash outlays in your electronic or paper day planner. This habit can go a long way toward substantiating those items for your tax records in the event of an audit.

(Related: How a Banker Sees Your Financial Records)

"Often on tax returns, those numbers are too round. No one drives exactly 5,000 miles for business in a year, so the IRS knows this is an estimate," Mari says. "In an audit, if you can't substantiate those numbers, the whole category [of write-offs] can get thrown out."

One of his clients provides a link to a Google map for each trip instead of trying to remember to note the mileage for every trip he takes on his odometer. That data, along with a day planner recording the trip, are usually enough record keeping to satisfy the IRS, Mari says.

3. Record deposits correctly.

Why it's helpful:
You may be less likely to pay taxes on money that isn't income.

What to do: Adopt a system for keeping your financial activities straight, whether it's a notebook you use consistently, an Excel spreadsheet or software such as Quickbooks. Business owners typically make a variety of deposits into their bank account through the year, including loans, revenue from sales and cash infusions from their personal savings. The trouble, Mari says, is that at the end of the year, you or your bookkeeper might erroneously record some deposits as income, and consequently pay taxes on more money than you've actually made.

4. Set aside money for paying taxes.

Why it’s helpful: The IRS can levy penalties and interest for not filing quarterly tax returns on time.

What to do: Systematically put a portion of money aside throughout the year for taxes. Then note tax deadlines on your calendar, along with prep time if you need it, to make sure you actually make payments when they're due.

Payroll taxes that go unpaid can be especially problematic, Mari says. He often sees cash-crunched entrepreneurs get through a down cycle by dipping into employee withholdings that they should have sent to the IRS.

(Related: Midyear Tax Check: Organize Now, Save Later)

"If you mess with [payroll taxes], you have a two-fold problem," Mari says. "You haven't paid taxes due and you've taken money that the IRS sees as belonging to your employees. They can be very unforgiving about that."

5. Keep a close eye on your invoices.

Why it's helpful: Late and unpaid bills hurt your cash flow.

What to do:
Assign someone in your organizations to track your billing. Then put a process in place for issuing a second invoice, making a phone call and perhaps levying penalties such as extra fees at certain deadlines.

"You want to have a plan for what happens if they're 30, 60 or 90 days late," Mari says.

Some entrepreneurs believe that once they've sent out an invoice, they've taken care of billing. Not so, Mari says. "Every late payment is an interest-free loan hurts your cash flow."

(Related: Cash-Flow Calculator Tool)


May the Workforce be With You


Date: Friday, October 28, 2016
7:45 AM - 9:00 AM
GateWay Community College Copper Room


ASBA's Fantasy Lights Holiday Soiree


Date: Thursday, December 1st
6:00 PM - 9:00 PM
Stone House Pavilion at the Phoenix Zoo

Get $5k-$20 in Free Marketing: Make 2016 Your Year for Success!

In Business Magazine

Use In Business Magazine as a tool to reach your customers for 2016. Through Print, Online, Social Media, Email & Events, you can realize an additional $5k to $20k in free advertising with In Business Magazine over 2016.


Small is the New Black


What’s trending for 2016? Small Business! This year, resolve to support our local economy by “Thinking Small” at least one time each week! Need help finding a small biz? Visit! #ThinkSmallBiz


Allowing you to concentrate on what’s really important.

Low and Johnson Inc.

We understand the insurance needs of locally-owned businesses because we’re one, too. As an ASBA member backed by CNA, we’re dedicated to helping small businesses like yours safeguard all you've worked so hard to build.



ASBA 101


Date: Held monthly
Time: Click to check times
Location: Phoenix or Tucson


ASBA Speed Networking


Date: Every 2nd Tuesday of the Month
Time: 3:30 PM - 5:00 PM
Location: Phoenix or Tucson

You're important to us and we want to help protect you

Mutual of Omaha

and your family through the use of insurance products. As a valued association member, you have the opportunity to purchase an insurance policy with lower premiums and/or enhanced benefits not available to the general public. Click here to learn more.


Have questions on small business and health insurance?

Health Insurance

Get the latest on individual, sole proprietor, or group plans related to small business. We can help you find the right plan for you, and your employees. Click to learn more!


CopperPoint Insurance Companies

CopperPoint Mutual

CopperPoint Insurance is Arizona's premiere provider of workers compensation insurance. We've been providing coverage and advocating for Arizona businesses, small and large, throughout the state since 1925.


Association Management Software Powered by®  ::  Legal