It’s that time of year again when people think about New Year’s resolutions and how to improve their quality of life.
Should I eat better? Exercise more? Maybe cut back on drinking?
Instead, how about a New Year’s resolution to do a better job keeping track of your finances?
The bookkeepers at One Source Services, Inc. and Sherman Oaks Accounting & Bookkeeping compiled a list of tips to get you started and keep you on-track with a New Year’s Resolution that will improve your business performance and your quality of life.
Revisit Goals Often.
Set goals for growth, revenue, and sales. Then every month, quarter, and year reflect on your performance in these areas as compared with the previous period. Look carefully at business growth, revenue & profits performance, sales trends, and expenditure trends. Understand how your business has changed since the previous month, quarter, and year. If changes weren’t in-line with your goals, then really dig-in to learn more and devise a plan to get on the right track. Your One Source Services bookkeeper can help with this.
Organize Backup by Year.
At Sherman Oaks Accounting & Bookkeeping powered by One Source Services, Inc. we store everything digitally in the cloud rather than filing papers in a box. But the concept remains the same: keep all records for one year in one folder (or box). Everything from 2019 will be easy to find when it’s in a computer file (or physical box) labeled 2019. Inside the folder may be other files to keep things organized because your financial statements, paid bills, canceled checks, bank statements, tax returns, and other documents will be stored safely inside. If you’d like help setting up a new system, reviewing your current one, or maintaining your files, then let your One Source Services bookkeeper know; they have simple & secure digital document management solutions.
Review Financials.
A financial review is as important to your business health as getting an annual physical is to your physical health; you can’t tell what’s going on inside without hard data on things like revenues, profits, capital, cash flow, and expenses. A business owner should do a monthly, quarterly, and annual review of their income statement, balance sheet, and cash flow statement at least. Analyzing reports provides insight into overall financial health and empowers you to make educated decisions. Otherwise you’re just shooting in the dark.
Save Receipts.
Although the IRS only requires receipt backup for expenses exceeding $75.00, we recommend that you save all receipts for all expenses regardless of value. When you don’t track smaller expenses, you potentially miss out on tax write-offs and other expense-reducing opportunities. Your One Source Services, Inc. bookkeeper has excellent receipt-capturing apps like ReceiptBank and QuickBooks Receipts to keep it simple.
Maintain Separate Accounts.
Personal and business accounts should be kept separate ALWAYS. Keep a separate business checking account and business credit card for business expenses. Personal funds should not be used to pay for business expenses! It’s one way to keep finances simple and easy to track, especially when your CPA, the IRS, or another auditor wants to review your books.
Keep Things Simple.
It’s crucial to categorize all financial transactions, but don’t over-complicate it. For instance, there’s no need to separately track Fax Paper from Copy Paper from Toilet Paper from Pens, etc. Listing it all under “Office Supplies” is perfectly acceptable. Involve your One Source Services, Inc. bookkeeper if you’d like to review your current chart of accounts or discuss how to most efficiently categorize transactions.
Establish a Petty Cash Fund.
Gain control of small charges! Do you charge small purchases on a credit card? Or, do you use personal funds to pay for them? Small charges add up to big expenses! Keep $50 or $100 on hand in a secured location, preferably a safe or lockbox, and use it to purchase small items. Replace the spent money with purchase receipts so the petty cash value is always in balance. Then when all of the cash has been spent, expense all of the receipts and replenish it with a new check to “cash.”
Know Your Staff.
This statement seems like a no-brainer. But, it’s not as simple as it may seem. There are consultants, independent contractors, freelancers, and payroll employees. Who’s on staff and who isn’t? Properly classifying employees is crucial when it comes to filing taxes correctly. There are different rules and regulations for payroll employees than there are for independent contractors. If you’re not sure, then ask your One Source Services, Inc. bookkeeper for help.
Review Bank & Credit Card Statements.
Your Sherman Oaks Accounting & Bookkeeping powered by One Source Services, Inc. bookkeeper is reviewing your bank and credit card statements at least once a month: AT LEAST. You should do the same! Thoroughly looking them over helps prevent fraudulent credit card and check usage. Did you know that unauthorized credit card & check use is one of the largest losses to small businesses?
Communicate with Your CPA.
Regularly share your accounts with your CPA; don’t wait until tax time. Some accountants may not want to look at financials until year-end, but it’s in your best interest to convince them to look more often and give you a rough tax bill projection to avoid potentially unpleasant year-end surprises.
The final tip is one that you should always keep in mind: use your resources! In addition to your CPA (mentioned in step 10), you have a team of financial professionals on your side. The CFOs, accountants, efficiency specialists, and virtual assistants at Sherman Oaks Accounting & Bookkeeping powered by One Source Services, Inc. are available and eager to help make your New Year’s Resolution a smashing success!