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TABLE OF CONTENTS
There are numerous engaging and fulfilling tasks that a new small business owner must take on in pursuit of their dream, but for most, accounting — unless you're an accountant, of course — just isn't one of them. If you're like most entrepreneurs and business owners, the only number you really care about is the one you see at the top of your bank account each month, but there are others (many, MANY others) that are essential to the success of your business.
So, unless you plan to hire out for small business accounting services, you'll need to make sure that you have a decent understanding of what is required to keep your books in tip-top shape.
DIY Bookkeeping: What Do You Need to Know?
If you wish to run a successful business, specifically one where you're able to stay on top of your incomings and outgoings, there are several actions you can take right from the start. Being proactive about these action items will save you a lot of time and headache later, so even though you may be chomping at the bit to serve your first few customers, it's important to do things right the first time around!
Set Up a Business Bank Account
This might be Small Business 101, but it shouldn't be overlooked. The only way to track exact amounts that enter and exit your accounts is to ensure that you have a business account for business purposes.
Every bank offers different types of business accounts that vary depending on your needs, but speaking to a business banking representative at your chosen bank is a good first step that will set things straight from the get-go. It's likely that you'll need to provide business documentation in order to open an account, so be sure to check with your bank before you show up.
Keep Your Business and Personal Finances Separate
We cannot stress this enough: Nothing could make your business more difficult than trying to operate out of your personal bank account. Whether you're running things as a sole proprietor or if you've registered your business as an LLC or other entity type, you're able to write off various business expenses.
Every time you purchase something for your business, be it supplies, equipment, software, or anything else, executing the purchase from a business bank account will make it infinitely easier to track and report than if you whip out your personal credit card.
Keep Track of All Business Expenses
Just to really reinforce those last two points, you'll want to keep track of every penny you spend on your business for tax purposes. In order to report accurately, you'll need every receipt documented and accounted for (there are fairly simple ways to do this, which we'll cover a little further down the page).
But here's a preview of some common expenses to track: fuel, mileage, business lunches/dinners, office supplies, computer hardware and software, phone bills, internet services, materials, rent, electricity, heating and cooling, insurance, and anything else that is purchased for business use.
Understand Your Tax Obligations
If you're going to manage your own bookkeeping, you'll need to pay attention to tax obligations for the state in which you operate. You'll need to charge sales tax on your products or services, but you'll also be responsible for taxes related to employment (if you hire employees) as well as on your income. Corporations have different tax obligations, though DYI bookkeeping isn't recommended if that's the case.
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