How to simplify accounting for small businesses
If you’re a small business owner or entrepreneur and feel as if your finances are not in order, here are five ways to simplify your bookkeeping – plus an overview of Bench Accounting.
If you are an entrepreneur, freelancer or small business owner and feel as if your finances are not in order, or less productive than they should be, then you are not alone.
Bookkeeping is often a neglected area and most entrepreneurs struggle to keep up with their finances and accounts throughout the year.
This, of course, adds even more stress once tax season comes around.
Lack of bookkeeping makes it hard to prepare for and file your taxes correctly.
It also makes it difficult to uncover the tax deductions you deserve so you can significantly reduce taxes owed or possibly get a refund back.
Plus, if you are scrambling at the last minute to pull your financials together for tax filing, you may even risk missing the deadline and owing a penalty. But it does not have to be this way.
We’ve partnered with Bench Accounting, an online bookkeeping service we personally use and deeply admire, to pull together these tips on how to simplify your bookkeeping all year round, but especially during tax time.
Keep your business finances organized
Even as a freelancer or solopreneur your business financials should be separated from your personal financials in different accounts, if possible.
And no matter how big or small your business is, it is best to use a dedicated software such as Quickbooks that links to your financial accounts and can automatically track and tag your income and expenses.
We personally use Quickbooks because of its simple interface. It is also ranked as the #1 accounting software for solopreneurs, freelancers and service-based business owners.
You can automate invoicing, organize expenses, track time and accept payments online with just a few clicks.
This is a sure way to keep all of your business financials on autopilot.
File all of your business receipts for simpler accounting later
To ensure you get all the deductions you deserve and can prove your spending if ever audited, it’s best to hold on to all of your business expense receipts.
We personally use Evernote to organize and save all of our receipts during the year.
For any paper receipts we simply scan a picture of it with the Evernote app and file it digitally.
What we love about Bench is that you can also upload all of your receipts and store them in the Bench app, with no storage limits.
This makes it easy for them to link receipts to specific transactions, ensuring the accuracy of your financials and ability to identify deductions.
Set money aside for potential taxes owed
A lot of business owners don’t know that the IRS in the US as well as other governments require you to estimate and make payments on your tax liability throughout the year. While this doesn’t necessarily simplify accounting, it can save you a lot of time by avoiding anything going wrong here.
A good rule of thumb to manage this requirement is to set aside 30% of your projected earnings. You can set it up to automatically transfer this amount into your business savings account on either monthly, quarterly or annually. This may seem like a pain at first, but it’s very simple to set up and ensures you won’t accidentally spend these funds. That way you have the money available when it’s time to prepay the government.
Stay up to date on tax reforms for small business
You want to be fully aware of how any changes to the tax laws impact you as it may influence how you manage you finances throughout the year.
The most reliable way is to visit your governments tax website, such as irs.gov in the US, and read through any announcements and changes.
You should also speak with your CPA or read the blogs and updates of any do-it-yourself tax filing service you may use.
If filing your taxes on your own, we recommend H&R Block for their straightforward and affordable online tax filing service as well as audit protection plan.
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Work with a dedicated bookkeeping team
Believe it or not, tax season, and managing your finances throughout the year, can be a simple and seamless experience if you bring in a professional. Bench works by combining intuitive software with a human-operated service.
Unlike other bookkeeping options, you won’t have to input information yourself or deal with your books independently. Your assigned bookkeeper will do that for you each month. By removing the burden from your small business, you can really simplify accounting across the board.
One of Bench’s best features is the year end financial package that they create for tax filing. It includes everything you or your accountant will need to file your taxes. They even include a detailed backup in case of an audit, and notes for expenses that need specific tax treatment.With Bench, you also get the peace of mind that your books are completed on time and accurately.
That means less time spent bookkeeping, and more time to focus on building your business and making more money. If you’re struggling with bookkeeping, or even if you need multiple years of historical bookkeeping completed, Bench can help you get caught up to file on time and stay on top of things in this year and beyond.
Bench is obviously not for you if you aren’t able or willing to make a small investment in getting the professional help you need. If you enjoy doing your own financial bookkeeping (and we have friends who genuinely do, so get it) then Bench may not add value to you either. Bench is best for any business who doesn’t have the time, energy or wherewithal to do their bookkeeping in-house.
In partnership with Bench and other services mentioned, we may receive a small commission for our referral, at no extra cost to you.
