Can we talk about the elephant in the room?
That big, ugly, intimidating thing about being a business owner that we all want to pretend doesn’t exist? It hangs over our heads like a high school senior thesis that you know you have to do in order to graduate, but you procrastinate and procrastinate because it just seems too big and too overwhelming.
And the next thing you know, it’s the week before finals are due and you haven’t even started.
So now you’re rushing to slap together some haphazard research paper on “Stereotypes and the Portrayal of Italian-Americans in Media,” hoping that it doesn’t just sound like you're recalling a bunch of funny anecdotes about your childhood*. Wait, what were we talking about?
BOOKKEEPING. I’m talking about BOOKKEEPING.
Record-keeping, tracking financials, whatever you want to call it (except don’t call it accounting or tax preparation – it’s not quite the same….more on that later!)
The majority of us small business owners didn’t take the academic path to get where we are: like me, you probably didn’t take finance courses or get an MBA. You had a passion for your craft, and your business grew out of that.
We are the creative types.
We are not necessarily the mathematical, financial, or even Excel spreadsheet-competent types.
So, every time we hear that we’re supposed to be saving our receipts, reconciling our accounts, and sending in quarterly tax estimates, there’s this little wave of cold fear and guilt that washes through our gut. We metaphorically tiptoe backwards into the crowd and hope that no one notices that we have no idea what we’re doing.
The fear ends today.
Victoria is on board with us at *Spark* to take the mystery and fear out of the book-keeping process.
Victoria is a book-keeping pro and the Ladyboss of The Neat Keep, a cloud-based bookkeeping organization.
“My niche is female entrepreneurs, and I believe that a solid financial foundation is the key to a successful and thriving business.
I offer full-fledged bookkeeping services, but also training and set up services for business women who are just starting out and do not know the first thing about bookkeeping!”
I’ve asked Victoria to give us 5 simple concepts you can do to set your small business on the right path come next tax season. You can start right now with these 5 Tips From A Bookkeeper for the DIY Entrepreneur
5 Tips From A Bookkeeper for the DIY Entrepreneur
1. Have a system! I don’t really care if you write out every sale by hand on a poster board with glitter markers or if you pay thousands of dollars for high end, super sophisticated digital bookkeeping systems (OMG, will you PLEASE tag me in a pic of your glitter financials poster board?!) Pick something and get started. You can even start with a DIY free system and slowly convert to a paid system over time.
My suggestion to keep it simple for the DIY Bookkeeper is to either:
*Set up a spreadsheet in Excel – or start with our downloadable template.
*Use Wave Accounting, a FREE online program that helps you set up your bookkeeping, track sales, and send invoices. A lot of my clients have been really happy with it, especially for folks with Etsy shops, because it automatically synchs the sales from Etsy.
2. Keep receipts – it’s as easy as snapping a selfie. It takes 30 days to make a habit, right? Make a game out of it – do one of those #30daychallenges where you take a picture of every receipt from a transaction related to your business and put it in a folder in your phone’s photo album called #receipts. No, the hashtags don’t matter, but people love hashtags, so whatever it takes to make it fun for you to remember.
3. Keep business and personal transactions SEPARATE. ALWAYS. After you’ve gotten in the habit of saving your receipts or snapping pics of them, you’ll start to realize how tedious that would be if you didn’t separate your transactions. When you go to Wal-Mart, pile your purchases into ‘personal’ and ‘business.’ Trust me – the cashiers are used to people saying, “I need this to be in two transactions.” Think about how much time it will save you with your bookkeeping.
If you’ve bought 10 items, and only 4 of them are business-related, you’ll have to read through each item and copy it into your record-keeping system individually. You can spend an extra 15 minutes each week, hour each month, or HOURS each tax year sorting through all of that mess. OR
You can separate your transactions, snap a pic of the receipt, and scan or enter that total transaction cost into your records in 1 second flat.
Let’s just say if you do the latter, you can easily take care of a lot of your basic bookkeeping yourself - at least until your business grows!
If you choose the former, then you’re going to want to hire someone to help you sort all the mess as quickly as possible come tax time. Not to mention, there are some serious legal ramifications if you’ve included personal expenses with your business tax reports – EVEN if it was accidentally because you weren’t separating transactions.
4. Schedule Weekly Check-ins With Your Finances Grab a glass of wine and your laptop and have a date with your books. No, it’s not terribly romantic, but ending your work week every Friday afternoon with a glance through the income your business brought in, expenses you dished out, and plugging in those receipts is a great way to stay up-to-date. Plus, having the glass of wine gives you something to look forward to.
5. Be Proactive in Saving for Taxes You’ve GOT to put aside a certain amount of money each month towards your annual income taxes. Don’t forget: when you work a traditional 9-to-5 job, your paycheck comes to you with a percentage already deducted for income taxes, insurance, and retirement savings. When you’re paying yourself (or not making a paycheck at all) no one is doing that for you. I see so many small business owners absolutely crushed when they realize how much they owe in income taxes in April. For example, $3,000 divided over 50 paychecks a year is $60. $3,000 divided over zero paychecks a year is $3,000. Can you afford to write a check to the government for $3,000 one month out of each year? (If you can, I hate to say it but you probably are going to be paying more than $3,000 in taxes!)
Ok, Lady. That’s it!
So let’s get to work and make THIS the month that you set up your bookkeeping properly for your business.
(Even if it means shooting a quick email to Victoria to see if you can just hire her to do it for you – don’t feel guilty if any of this is just too much for you. The SMART thing is to delegate tasks that are tedious, you’re unsure about, or that just keep slipping through the cracks of your much bigger to-do list. Check out our list of 8 Reasons to Delegate to a Professional Bookkeeper if it makes you feel better about not trying to do everything yourself!)
* PS. Yes, that was the title of my own senior thesis. No, I didn’t actually procrastinate. I spent all year meticulously researching, outlining, and piecing together a beautiful research project that won me third place in the behavioral research category in the region. Please. You obviously don't know me yet.... but we're getting there.