Small businesses might not always have a lot of transactions, but it’s important to make sure that you’re keeping good track of everything. Ideally, you will want to have a system that tracks your accounts payable and accounts receivable — that is, money that you owe to people (bills, products, office expenses) and money that is owed to you (from the sale of your product or service). The other major types of tracking for your business will be payroll and taxes.
For accounts payable, the major issue here is making sure your bills get paid on time. If you have credit with a vendor, you will also need to make sure your balance gets paid. For accounts receivable, this tracking should be somewhat easier — unless your clients or customers are not paying per service or product. When you have a service-based company that focuses on long-term contracts, tracking payments and due dates can be more difficult for the small business bookkeeper.
Payroll is also a necessary evil, but if it’s done right from the beginning, it can be relatively easy to scale. You need to keep track of your employees’ hours or salary payments, as well as any contractors that you might have. Accurate record keeping is paramount for payroll, as you will have to pay payroll taxes and can incur fees if there are significant (or any!) errors. Payroll taxes are typically filed monthly, although some states allow quarterly filings or – in a few cases – yearly.
If you’re a small business bookkeeper and you’re trying to keep track of expenses, you’ll want a system that is easy to understand and create reports from. Some people use online bookkeeping systems that they can then transfer to an accountant during tax season. Others use local computer programs, and old fashioned businesses with few transactions might even still use a ledger book! Whatever the way you choose to do your bookkeeping and accounting, you will need to make sure that it is systematic, workable for the size of business that you have and your number of expense transactions per month or year, and easily scale-able should your business grow or shrink.
One of the most common mistakes of bookkeepers is that they will start out with a system that keeps track of business expenses fairly easily, but when growth inevitably happens in their organization, that system doesn’t scale. There are lots of computer programs and online bookkeeping systems that will help with this. Happy hunting!