When it comes to payroll, small business owners face many challenges. From filing taxes to tracking employee salaries, bookkeeping is an important part of running a successful small business. This blog introduces you to the top 10 best practices for bookkeeping in a small business, based on research and experience. By following these simple tips, you’ll be able to streamline your payroll process and keep track of your finances much more easily. So what are you waiting for? Get started today and make your bookkeeping and payroll processing better.
7 tips for better business practices and bookkeeping in a small business
Keeping your business finances in order can be a daunting task. But with a little bit of planning and effort, it can be a lot easier. To get started follow these simple tips for better bookkeeping and small business payroll.
1 Keep your business and personal finances separate
Even if you are self-employed or a freelancer, it is highly recommended that you keep your personal and business finances separate. Your accountant will be happier when you do. When startups first get going they often overlook this aspect of running a business. By eliminating your personal transactions from your business account, you reduce any additional costs you might incur with your bookkeeping. This starts when you first setup your business. It is often the case that many small business owners blend their personal and business finances together because of time or not understanding the importance of using software solutions that companies like intuit make.
2 Pay Yourself A Salary
Owners of C corporations and S corporations must pay themselves a paycheck and run it through their payroll system for federal taxes. This normally would go through human resources in your company. Your payday should be consistent also. Your small business payroll software if critical to make sure your deductions are correct and personal information is correct too. One of the best payroll software solutions on the market today is Quickbooks.
By paying yourself a salary, you establish that your firm is a distinct entity and don’t have to breach tip number one by having your business pay your personal bills. Have the business write you one check per month or one check per week that you deposit into a separate account used to pay your personal expenses instead of numerous transactions throughout the month where the business pays an expense on your behalf.
3 Reimburse Yourself For Business Expenses
Despite your best efforts, you may find yourself using personal funds to pay for a commercial expense. Remember to include these business costs in your business bank account. One way to keep track of those expenses is to use an app that tracks your spending. Have the business issue you a banknote to compensate for the money you spent with your own money. This should be a different check than your monthly pay.
You should follow the same procedures as you do for your hourly employee(s) and salary employee(s) when reimbursing yourself. On a spreadsheet, list the costs together with the date, vendor, and purpose. Attach the receipts. The exact amount is then written on a check by your business. This will ensure that your bookkeeper accounts for the costs since they were paid from the company account with a check. It is a little tedious, but it’s worth it.
4 Don’t Forget About Your Mileage
Your business can deduct a standard mileage rate each year. For 2022 the mileage deduction rate was 58.5 center per mile. Check the help center of the IRS.gov website for more information about mileage deductions. Your payroll service provider should be working with your manager or bookkeeper to make sure those miles are logged into user-friendly software each pay period for you and your employees that are driving their vehicles for company purposes. Tracking mileage can be time-consuming depending on the interface of the software you are using. The hr tools that you use or the bookkeeping tools that you use to track mileage will help you at the end of the year with your filings.
5 Keep All Of Your Receipts
For many small businesses your hr needs and bookkeeping needs are often blended because the same person does it all. They often are the ones that also deal with health insurance and many of your business needs. Payroll companies like Quickbooks don’t rely on receipts to identify transactions, but the IRS does require you to keep receipts for your business. A simple way to keep track of those if you don’t have a digital solution is to keep a file folder system.
A simple file system is great for keeping track of employee benefits, customer service issues, email correspondences and which payroll solutions you are currently using for your business.
6 Keep Your Invoices Current
After delivering the goods for completing a service for customers make sure you keep that gusto and write up the invoice. This is self-service on your part and often is not done by the bookkeeping service. Many online payroll services like Quickbooks online have the option to make your invoices available to pay online. This makes it simpler for the customer to pay in a speedy fashion. Companies like Quickbooks will also direct deposit the money into your business account.
When you are pricing your services or products make sure you are staying competitive. Chat with some of the other businesses in the area and compare their pricing model with yours. Chat with them about their setup and the interface of the bookkeeping software they use too. You should have a base price for your products and services. Some companies have different pricing models for different regions they are located in for their business.
7 Send Invoice Reminders
When customers miss a deadline to pay that invoice, send them a reminder. There are how-to guides on what to use and how to use systems like Quickbooks to send automatic reminders. Always give the customer the benefit of the doubt and don’t assume they are trying to avoid payment. If they become unresponsive, gently send another reminder and then call them and ask simple questions like, “Did you receive our invoice for the work recently completed?”
Bottom Line
Small businesses can’t avoid the headache of bookkeeping by merely outsourcing payroll or payroll services or bookkeeping services. Your payroll taxes and payroll processing are two very important pieces that you don’t want to get wrong. The penalties are stiff for payroll errors and companies like check-write payroll train every year to keep up to date with current IRS rules and guidelines for payroll. Most of the tips in this article are for bookkeeping and payroll because it is a crucial parts of your business.
If you find yourself stuck in your bookkeeping and payroll. Give us a call to find out how we can help you with your payroll and bookkeeping. We have dedicated staff in-house with years of experience to handle your payroll and bookkeeping. At check-write payroll, we can help you with deductions like child-support, social security, FICA, federal taxes, and retirement funds that need to be taken from your and your employees’ payroll each week or month.