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When a business owner starts outs, they either hire a bookkeeper to handle their books or they embrace a DIY bookkeeping process. With so much information available, you can simply browse the internet or spend a few hours watching YouTube to learn how to do your own bookkeeping.
Let me start out by saying that doing your own bookkeeping is not necessarily a bad idea. This would give you an opportunity to not only know the financial aspect of your business, but it’ll allow you to different terminologies associated with bookkeeping and accounting.
But as you get busier with running your business, spending time on your books may prove to be a challenge, but we’ll get into that later. In the meantime, if you’re on a tight budget and need to do your own books, we’ve put together a simple list of 4 things you can do for your diy bookkeeping process.
Step 1: Keep your personal and business expenses separated
So that you can track your business expenses the right way, you need to open a separate business account at your local branch. A new business owner will often ask if a business account is needed, the answer is YES!
When it’s tax time or when it’s time to reconcile transactions, keeping these two expenses together would only bring you nothing but headaches when you’re trying to remember which expense belongs to who, to what.
Step 2: Don’t put it off
With anything in life, it’s important to stay consistent. The same goes with your diy bookkeeping process. Choose a specific day during the week to sit down and update your books. Enter each transaction that hits your bank account. If you make that a habit of recording everything, and on time, you will never have to worry about falling behind.
Step 3: Choosing a bookkeeping system
With technology today, you don’t have to necessarily keep everything in a file cabinet or be an expert at Microsoft excel. But, if you choose to do so, that’s your choice. You have the option to also choose a diy bookkeeping software where you can record and manage your books.
Again, consistency is important. Regularly updating your system will prove to be such a huge benefit in the long run and when it comes time to file your taxes.
In terms of filing your receipts, gone are the days where you have to keep all your receipts in a shoebox. Cloud based system like Google Drive, Dropbox and even Shoeboxed are specifically designed to securely upload and save your important documents. Even the IRS has taken advantage of the technology by allowing digital records to be sent to them.
Step 4: Categorize each transaction
This may seem like a tedious task, but believe me, it’s extremely necessary. When you categorize each of your transactions, it’ll help you identify more deductions that are available and if you were to get audited, you’ll have the information readily available.
As you are doing your own books, marking each receipt as you record them will allow you not to forget what that expense was for. Your accountant come tax time will need certain reports from you to file your taxes.
As you are categorizing and organizing your books, reports like: assets, liabilities, equity, revenue and expenses are things that accountants will need if you’re using one to file your taxes.
At first, because you are a new business owner, doing your own books may not seem that big of a deal since you probably don’t have a lot of transactions. But, as your company grows, you’ll get to a point where doing your bookkeeping feels like another job. So, what do you do in that case?
That’s where a company like miplly would come in to help you out. We do your bookkeeping for you so that you can focus on running your business. In addition to that, we offer additional services that will take your company to the next level.
If you’re not comfortable linking with some of the online bookkeeping services out there, and you desperately need someone else to take over your books, looking into hiring a freelance bookkeeper or a bookkeeping firm in your area may prove to be beneficial.
Bottom line, whether you’re a new business owner or a veteran, you need to have a bookkeeping system in place to make sure your finances are neatly tracked and organized.