22 Must Know Small Business Bookkeeping Tips in 2024

Are you feeling overwhelmed by your business’s financial obligations? If so, you’re not alone. 

Many business owners are drowning in receipts, struggling to balance the books, and fearing the looming tax deadlines.

But luckily for you, you found this article!

In this guide, I will cover 22 essential bookkeeping tips that every small business owner can adopt to empower themselves to manage finances effectively and propel their business forward.

No more financial stress, just confidence in your decisions and the freedom to focus on growth. Sound good? Let’s get started!

Why is bookkeeping essential to your business?

Bookkeeping is critical because things can quickly get out of hand without proper oversight of monetarily based transactions.

Did you know 82% of businesses fail due to cash flow problems? Crazy, right?! That’s why proper bookkeeping is crucial—it can identify issues before they become serious setbacks.

On the flip side, it also highlights what strategies are yielding positive results.

In other words, keeping a tight grip on your finances is the key to success. You want to avoid making uninformed decisions that could put you in a cash flow in a bind. 

1. Keep business and personal expenses completely separate. 

We’ve heard it over and over again: keep your business and personal finances completely separate.

But it’s at the top of the list because applying this rule to your business will make your finances much smoother and easier to navigate. 

You can track money in and out more efficiently, and come tax time, you won’t be tearing your hair out. So, do yourself a favor—split those accounts and keep things tidy. It’s like the first step in Bookkeeping 101 for small biz owners.

 2. Switch to a cloud-based bookkeeping software.

Switching to a cloud-based bookkeeping software can be one of the best bookkeeping tips for your business needs.  

You’ll no longer be restricted to one computer or spending hours entering data into spreadsheets. 

With cloud-based software, you can access your financial data from anywhere with an internet connection. Plus, it offers real-time collaboration features, allowing you and your team to work on your bookkeeping process simultaneously, no matter where you are. 

 3. Automate as much as you can.

Automation is a gift sent from the tech gods. It is a great hack for freeing up brainpower, streamlining operations, and gaining time to focus on the essential tasks of running a small business. 

Automation takes care of specific tasks for you. For instance, with your new cloud-based bookkeeping software, you can set it to generate invoices, remind you of payments that need to be made, and then proceed to make those payments on your behalf. 

You could also create rules for certain transactions that come through your bank feed, instructing the software to assign them to a particular category instead of manually doing it yourself.

The thing here is that it takes weight off your shoulders, and now you have more time to manage your small business. 

4. A little bookkeeping a week keeps the headaches away. 

Here’s the deal: I suggest checking your account daily, but I only want to put this type of pressure on people if they’re up for it. At the very least, review your account weekly and sort those transactions before they overwhelm you.

Consistency is critical in managing the financial side of your small business and learning the basics of bookkeeping.

Dedicating a bit of time each week to properly review and categorize your transactions will prevent the stress of dealing with a mountain of paperwork later on. Plus, staying on top of your finances gives you a clear picture of your business’s financial health.

5. Create a bookkeeping workflow.

Creating a workflow is like sketching out a map for your bookkeeping needs. It’s like having a clear path, so you don’t have to wonder, “Where do I begin?

It would be best if you began by listing everything that needs to be done and then structure them accordingly. Since some tasks depend on the completion of others, you must tackle them incrementally until you’ve systematized your workflow.

Another significant advantage of creating a workflow is that if you have a team or spouse assisting with your books, you can easily hand over your workflow, enabling them to follow the same steps when assigning bookkeeping tasks.

6. Reconcile your bank accounts regularly.

Reconciling your bank accounts is one of the best practices every small business owner should follow to avoid bookkeeping mistakes.

If you haven’t been doing this, it’s a must, and it should be done monthly.

By comparing your bank statements with your accounting records, you can quickly catch discrepancies, such as missing transactions, recording errors, and unauthorized charges. Don’t let this simple step become a standard bookkeeping error for your business.

7. Keep all receipts organized with cloud-based software.

Keeping all your receipts organized is crucial for maintaining accurate records of your business transactions. But let’s be real: managing receipts can quickly become a nightmare. 

That’s why you must have receipt management software. With this software, you snap a picture of your receipt with your mobile device, and ta-da! You don’t have to worry or think about that receipt until your next scheduled bookkeeping session, when you will make sure it’s properly assigned to the proper expense. 

We like to use Dext, a user-friendly platform that simplifies receipt management for many clients. 

8. Utilize invoicing software for prompt payments.

Offering your clients or customers various payment options significantly influences your ability to get paid promptly.

Invoicing software streamlines your payment process and keeps your records organized in one place. Many bookkeeping software options come with built-in invoicing features, making it even easier to manage your finances.

Also, combining a payment processing platform with your invoicing software can speed up the payment process, ensuring you get paid quickly and securely. Which ultimately helps keep your business bank account healthy 

9. Make sure to account for processing fees.

Accounting for processing fees is a big one that many who choose to DIY their bookkeeping overlook. 

These are the credit card processing fees, bank transaction charges, or other payment processors such as Stripe, Square, and PayPal. If not properly accounted for, these fees can quickly add up and significantly impact your bottom line. 

So, make sure you are keeping track of these, and if you get to a point where you feel overwhelmed by the complexities of these platforms, consider outsourcing your bookkeeping tasks. 

10. Stay on top of your accounts receivables, a.k.a. who owes you.

Staying on top of your accounts receivables is vital for maintaining a healthy business cash flow. 

After all, your income is the lifeblood of your business, and ensuring that you’re getting paid on time is essential for growth and covering operation expenses. 

Set clear payment terms like “upon receipt” or 15/30 days. Regularly review your A/R status and promptly contact delinquent invoices. 

11. Hire a payroll outsourcing service. 

I suggest outsourcing your payroll responsibilities. This approach would allow you to hand off the complexities of payroll management and ensure that everything is filed accurately and timely.

Your role with the payroll provider is to provide the necessary information about your employees’ hours or earnings and adequately map them to your bookkeeping account. If you’re not confident about handling the mapping process, consider hiring a bookkeeper to manage your setup. 

12. Learn how to read your reports.

You must know how to read your financial reports to understand your business’s operations. You should familiarize yourself with three main reports: the income statement statement, the balance sheet, and the statement of cash flow. 

The income statement shows how much your business makes and spends, telling you if you profit. The balance sheet shows what your business owns, owes, and what’s left over for you. The cash flow statement tracks how money moves in and out of your business, so you know where your cash is coming from and going.

By mastering these reports, you gain valuable insights into your business’s performance and financial health, enabling you to make educated decisions to drive growth and success.

13. Review and analyze your reports (Quarterly at the very least)

Now that you know how to read the top 3 pillar reports, it’s time to schedule their review.

I recommend reviewing them monthly for a comprehensive understanding of your business finances. However, if monthly reviews aren’t feasible, aim to review them quarterly at the very least.

Regularly analyzing these reports allows you to stay on top of your business’s financial health, make informed decisions to operate your business effectively, and learn what your business requires.  

14. Learn how to budget for your business.

Learning how to budget is a fundamental aspect of good bookkeeping. Budgeting is not just about tracking expenses; it’s also about planning for the future and ensuring financial stability.

Budgeting is about setting money aside for significant expenses, like investing in new equipment, expanding your business, or handling unexpected costs. 

This is preached in personal and business finances because it works! 

15. Utilize time-tracking software for your employees.

Incorporating time-tracking software for your employees lets you precisely monitor employee hours, making payroll a breeze and ensuring you’re on the right side of labor laws. 

With the right software, you can effortlessly monitor productivity, optimize resource allocation, and give your business a healthy financial boost. 

It’s a one-stop shop for managing details like work hours, PTO, overtime, and more. In short, it’s a total win-win for both efficiency and compliance.

16. Track business mileage for tax deductions

Always keep meticulous records of your business mileage. This will ensure you’re not leaving money on the table come tax season. 

Business owners who handle this diligently can reap substantial benefits. Every mile, whether driving to meet clients or attending industry conferences, adds up. 

For those who use their personal vehicles, separate personal and business mileage is required. 

17. Implement security measures to protect financial data.

Every business, regardless of size, must prioritize its financial data security. With cyber threats rising, small business owners must proactively safeguard sensitive information. 

Start by using secure passwords and implementing multi-factor authentication. Keep software updated to patch vulnerabilities and encrypt sensitive data in transit and at rest. Limit access to financial information to trusted employees and regularly back up data to prevent loss. 

18. Backup financial data regularly

Backing up your data is a non-negotiable aspect of managing any business. Whether you’re running a small startup or a thriving enterprise, ensuring your data is safe and secure should be a top priority.

No matter the type of business, one of your top business decisions should be to make regular data backups a standard practice. 

19. Reimburse yourself for business costs. 

This practice ensures that personal and business expenses remain separate, simplifying accounting and tax processes. 

By compensating yourself for these costs, you’re repaying yourself for money spent on behalf of the business. This helps maintain clarity in financial records and allows you to assess the profitability of your venture accurately. 

20. Stay on top of cash transactions.

Keeping track of cash transactions is vital for effective bookkeeping because it ensures accurate records of your business income. 

Monitoring every cash inflow and outflow gives you a clear picture of your financial health. It also helps create precise financial statements, makes tax filing more manageable, and provides insights into your business’s cash flow patterns. 

21. Kow your operational costs

Understanding your operational costs means knowing where your money goes in your business; sadly, this one gets overlooked quite a bit. 

Operational costs include rent, utilities, paying employees, and buying supplies. By monitoring these costs closely and identifying areas where you’re spending too much or not enough, you can make smarter choices to help your business grow. 

It’s like figuring out where to save money or spend more wisely to maximize every dollar. So, by paying attention to these details and making smart decisions, you can move your business in the right direction.

22. Consider hiring a professional bookkeeper.

If you’re overwhelmed by the numbers or lack the time to analyze them, outsourcing your bookkeeping to a trusted professional is worth exploring.

Outsourced bookkeeping services offer numerous benefits, from saving time and reducing stress to ensuring accuracy in your financial records.

 By hiring a professional bookkeeper, you’re tapping into their skills, understanding, and expertise, enabling you to concentrate on what you do best—running your business. 

Plus, outsourcing your bookkeeping can often be more cost-effective than hiring an in-house accountant. After all, it could be the key to streamlining your financial processes and taking your business to the next level.

Final Thoughts

In conclusion, committing to handling your books is crucial to alleviate the stress that comes with the thought of managing your books and the familiar looming feeling during tax season.

While bookkeeping may seem overwhelming initially, reviewing these 22 essential tips outlined in this guide provides you with the necessary steps to take control of your finances. As a professional bookkeeper, I recommend dedicating time to your books at least once a week and creating a workflow tailored to your industry. Although many steps may be involved in bookkeeping, you’ll discover the most efficient order for completing tasks as you become more familiar with your books. Take notes, establish a sequence for tasks, and stick to it.

Overall, don’t skip out on this vital part of your business—it’s essential for making informed decisions, fueling growth, and ensuring the safety of your financial assets. 

FAQ’s

What are the benefits of accurate bookkeeping?

Accurate bookkeeping gives you a clear understanding of your business’s financial situation. It helps you track profits and losses, manage cash flow effectively, comply with tax regulations, and make strategic decisions to grow your business.

How can I improve my bookkeeping practices? 

Start by systematically organizing your financial documents and records to improve your bookkeeping practices. Use accounting software to streamline processes and reduce errors. Regularly reconcile accounts, track expenses, and stay updated on relevant tax laws and regulations.

What are some common bookkeeping errors to steer clear of?

Common bookkeeping mistakes include:

• Neglecting to reconcile accounts regularly.
• Mixing personal and business expenses.
• Failing to keep accurate records.
• Not staying on top of invoicing and payments.

Avoiding these mistakes can help maintain the accuracy and integrity of your financial records.