Have you ever driven somewhere and had to be there by a specific time? But you left the address behind, so you don't have a map to follow?
Not using a bookkeeping (accounting) system for your business is like leaving the address behind.
An accounting system is your map. The income and expenses are the roadways to your destination: the amount of profit you want to earn.
A bookkeeping system is a place for all the transactions of your business, your income, and expenses to live.
It is a software system containing all the accounting rules that record the financial information and various financial transactions that occur in the business.
The transactions of your business are brought together in the financial statements. They are the balance sheet and the income statement (also called the profit & loss). There are other essential statements, but these are the most important two.
Has this ever happened to you? You purchase something for your business, and you have no idea what to do with the receipt. So you collect them. Or you toss them.
Have you ever thought about how many receipts you receive in a week, a month, a year? They are annoying, take up space in our wallet, file folders, or the dreaded receipts box. Alternatively, many of them collect in our email.
Receipts are important to keep, however, the IRS does not require them. However, if you face an audit, you will need to prove the expense. The easiest way to justify an expense is with the actual receipt.
Yes, It's Annoying
Saving receipts can be a pain, yes, I know. However, if you have a system and a process, you can save a receipt in about 15 seconds. But why should you save receipts in the first place?
Have you ever approached tax time, scrambling to update your bookkeeping software? Did you have questions about expenses and what they were for? Could you...
Accounting mistakes often made by small business owners can be avoided by setting up your business and your accounting properly. As a result of setting up your business structure and accounting properly, you can avoid issues later on.
Now, I'm not trying to scare you, really. It's easy to avoid accounting mistakes by taking a few steps to set up your business up properly. I will teach you the basics of business structure, what you need to know and what not to do.
Small business owners can take a few steps to set up their business properly to avoid accounting mistakes. The structure of your business will affect your accounting which affects your taxes. And none of us like dealing with taxes! Don't worry, even if you have been in business for a while and did not take these steps, it's not too late.
If you are not tracking your income and expenses properly, consequently you will have issues come tax time. You can use a simple...