Bookkeeping for Small Businesses: 2025 Complete Guide

Staying on top of accounts payable helps you avoid late fees and maintain good relationships. “Your accountant may be a tax preparer, a bookkeeper, a fractional CFO or they may have a different area of specialty,” Gilchrist explained. Business.com aims to help business owners make informed decisions to support and grow their companies.

• New Jersey had the highest corporate income tax in 2023 with an 11.5% tax rate, while North Carolina had the lowest tax burden with a 2.5% tax rate, as illustrated below.
• However, as one of the basic bookkeeping best practices, you should organize all your original invoices and receipts.
• Even small mistakes in business bookkeeping can snowball into expensive issues down the line.
• As small business owners who may be taking on bookkeeping for the first time, it’s essential to feel secure in your company’s bookkeeping and compliance.

No more logging into different systems or merging data in Excel to figure out your monthly cash burn. Budgets don’t need to be perfect, but they do need to give you a clear idea of what’s coming in and going out. Comparing your expected vs. actual income and expenses can help you spot issues early on and give context to your cash flow statement. Recording and reviewing your financial transactions regularly helps you visualize how money moves through your business, making it easier to stay in control of both expenses and income. Accounting is as important your first week in business as it is during tax filing time. Use these five accounting tips to keep your business’s finances healthy and stable every day of operation.

Your company’s financial documents can provide valuable insights into what to focus on, change and strengthen — and you should be able to read and understand them on your own. Based on the monthly sales, set aside some money to pay for your taxes. This will help you avoid having to outlay a significant amount of funds at the end of the year.

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Waiting until tax time to hire a bookkeeper means piecing together 12 months’ worth of financial transactions in just a few short weeks. But a bookkeeper’s work isn’t just about top 13 bookkeeping and accounting tips for small business owners filing tax returns; it’s about keeping your books accurate all year round. Without that ongoing support, your accounts payable, accounts receivable, and financial reports can fall out of sync. A good setup ensures that every entry lines up with a specific business activity and gives structure to your financial reports. While recording by hand may be the cheapest solution, it can be time-consuming and prone to errors. This is the reason a majority of small business owners either hire accountants to compile financial statements or opt for small business accounting software to ensure efficient recordkeeping.

Accounts payable

While you don’t want to start the debt collection process too soon, you must ensure you get paid. Regular expense tracking will give you a better idea of how much you’re spending and help you devise money management strategies. Trying to run a company and keep up with all of the physical paperwork that comes with it can be terrifying in and of itself. Allowing your customers or clients to use digital payments has a few benefits. Companies tend to have full-time staff, part-time staff, contract workers, or a combination of all three.

Still, small business accounting can be a challenge for leaders without a financial background. We’ll share 11 tips to help demystify accounting and help you keep your company on the right path. She often works with clients on-site to maintain their business books, providing convenience, efficiency, and high-quality work for our clients’ financial needs. Travis Dyer earned an AA Degree in Accounting from Brookhaven Community College in Farmers Branch. Prior to joining DiLucci, for over 5 years he worked as an Accounting Manager for a private equity firm responsible for handling the day to day accounting for multiple investment partnerships.

Even if you rely on software, it pays to familiarize yourself with basic double-entry bookkeeping. A very small business with just a few financial transactions per month might need just 5 to 10 hours monthly for bookkeeping. A larger company that also manages accounts payable and accounts receivable, or requires advanced financial reports, might need 5 to 10 hours per week. In these cases, support from accounting software or a dedicated bookkeeper can offer significant time savings. Accounting software was once cost-prohibitive for many small companies, but now, every business owner can access robust platforms for a monthly fee (or even for free). Yes, free and easy bookkeeping software exists, but it may not meet the needs of every small business.

Without bookkeeping best practices, cash flow mismanagement could lead to financial struggles or missed opportunities for growth. Whether you hire a good bookkeeper or opt for smart cloud accounting software to automate the process and save time, the right solution depends on your unique business needs and goals. When it comes to managing finances, bookkeeping for small businesses is much more straightforward compared to accounting. Bookkeeping focuses on tracking and recording financial transitions, whereas accounting is more complex.

In our experience, it is significantly easier to maintain a bookkeeping schedule if you commit to a specific time each day. Doing so will help ensure that the bookkeeping process is as efficient, painless, and accurate as possible. DO Reconcile Accounts Regularly Make sure your bank and credit card balances match your records. Reconciliations help identify unauthorized charges, missing transactions, or duplicate entries.

• Business owners often forget to get receipts for charitable donations.
• It may make sense to improve your invoices or to update your billing and invoicing software.
• Asking for help is a wise business decision that can set you up for growth and success.

According to the NSBA Small Business Taxation Survey, filing and completing their federal income tax returns is one of the top concerns for small business owners. Now, at DiLucci, she is a valuable member of our accounting team, providing efficient and high-quality bookkeeping services for our business clients. Whether you’re handling the books yourself or working with a professional, understanding the dos and don’ts of bookkeeping can save you time, money, and headaches down the road. According to the LLC formation principles, this step will help streamline the bookkeeping process. Such bookkeeping best practices will protect your business assets in case of auditing or legal disputes, and vice versa.

Most options cover basic invoices, expenses, and financial reports, but typically lack more advanced features like payroll, double-entry bookkeeping, or automated bank account sync. They might work well for a new business, but as your financial transactions increase, you may need to invest in more comprehensive accounting software or hire a bookkeeper. Your accounting method sets the rules for how and when your business records income and expenses. Locking this in early keeps you consistent as you start recording financial transactions.

Some of the highest and most frequent penalties and interest are charged for late payroll returns or late payroll tax payments. We usually recommend for small business owners to use a professional payroll service to ensure accuracy in the process and mitigate risk. We can either set you up with a payroll company and can often get you a discount, or we can train you on how to run your own payroll through your accounting software like QuickBooks. Having a robust bookkeeping system is a crucial component of efficiently running a business.

Even if you’re using accounting or budgeting software, you’ll need to confirm that your balance sheet, accounts payable, and accounts receivable match up with your bank statement every month. You don’t need to become a bookkeeper, but taking the time to review your debits, credits, and account balances keeps things clean and can help catch mistakes before they become problems. Letting financial transactions pile up is one of the easiest ways to lose track of your books. Recording invoices, receipts, and income regularly keeps your numbers up-to-date and your financial statements easy to manage. Keep a separate bank account for your personal and your business expenses. If you’re a solopreneur or independent contractor, chances are you’re responsible for everything, including the accounting.

Seeing a large amount in the receivables column is a good thing, but the money doesn’t really count until it is in your bank account. Stand firm and insist you receive payment for past orders before letting them have more materials or services. The receivables department is crucial in keeping your company afloat. It may make sense to improve your invoices or to update your billing and invoicing software. Once your business is registered and starts making transactions regularly, it’s time to prepare the bookkeeping system for your business. The financial books allow you to review your income and expenses, take control of your finances and make smart decisions.