Small Business Bookkeeping: Essential Tips for Success

As a small business owner, it’s important to track your income and expenses with a bookkeeping system.

It’s the best way to stay out of fiscal trouble and make sure you always have a clear idea of your business’s financial health. In this blog post, you’ll learn the art of small business bookkeeping so you can keep your finances in check even as you scale.

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Small Business Bookkeeping: What Is It and Why Is It Important?

Bookkeeping is likely one of the last things on your mind when you start a new business venture, but it’s also one of the most important.

As you grow a business, your income and expenses will constantly fluctuate. As a result, you need a system, method, or accountant to balance your books and keep you in the green.

Bookkeeping for small businesses is about managing your finances month to month, measuring all of the important figures from revenue to expenses, and keeping up with your IRS tax obligations when the time comes.

Balancing your books is important because it allows you to accurately forecast incoming and outgoing money, helping you plan ahead and make informed decisions.

Best Practices for Small Business Bookkeeping

Bookkeeping for a small business requires a certain level of diligence to handle, but with the right approach, anyone can monitor their business’s financial health over time.

Here are some best practices to follow to balance your books:

• Tracking Expenses - For many business owners, expenses hold them back from turning a profit month after month. The main reason for this is a lack of transparency over outgoing transactions from the business. By tracking every business expense, you’ll know exactly what you need to make to operate a profitable business.
• Categorizing income - When bookkeeping for your small business, you should always categorize your income. That way, you know what your most profitable revenue streams are, and you can accurately file taxes according to the type of income.
• Using accounting software - Small business bookkeeping software is an excellent aid for keeping track of your finances. If you run the numbers yourself, or even if you hand them over to an accountant, it can help to have a robust system for categorizing your finances and displaying them clearly.
• Schedule regular bookkeeping sessions - One of the important aspects of any bookkeeping process is regular check-ins. To stay on top of the numbers, you need to schedule regular bookkeeping sessions.

Can I Do My Own Bookkeeping for My Business?

If you’re a small business owner, you can certainly create a bookkeeping system for your small business by yourself.

As a process, it’s simple mathematics. You’ll need to track every incoming and outgoing transaction associated with your business, and categorize them appropriately.

Whether you should is another question altogether, as the complexity of your bookkeeping process will depend on various factors such as the size of your business, whether or not you have employees, and how many revenue streams you have.

While many small business owners do handle their finances in-house, it comes with risks and isn’t a decision you should take lightly.

Doing Your Own Small Business Bookkeeping vs Hiring an Accountant

DIY Bookkeeping

Taking on the responsibility of small business bookkeeping has its ups and downs:

Pros

• Clearly understand your finances - Taking the time to manage your finances will give you a level of clarity that can help you fully understand the ins and outs of your business, making it easier to make informed decisions.
• Save money - When you DIY the bookkeeping process, you can save yourself the expense of outsourcing. When you have to pay for various bookkeeping services, it can become a significant expense depending on various factors.
• Be flexible in your approach - Managing your business finances means you can do everything on your terms from the software you use to the approach you adopt.

Cons

• It’s time-consuming - Handling your bookkeeping, even as a small business owner, can feel like an overwhelming and immensely time-consuming task.
• There’s a risk of making mistakes - When you balance your own books, you assume the risk of making mistakes which could prove costly. Unless you’re confident in your abilities, it might not be worth the risk of going it alone.
• Tax season can feel daunting - If you balance your books, the approaching tax season can feel especially daunting as you might worry whether you’ve accurately captured a financial snapshot of your business.

Hiring an Accountant

If you choose to outsource the process and hire an accountant, here’s what you can expect:

Pros

• Reduce stress - Outsourcing your bookkeeping allows you to focus on your business without stressing over the numbers - even when tax season approaches.
• Get expert support - An accountant can provide expert insights on what you’re likely to owe for taxes, and how to cut down on expenses to maximize your profitability.
• Save time - As a small business owner, you likely have many responsibilities, so hiring an accountant can save you time to spend on more meaningful activities to grow your business.

Cons

• Extra business expense - Hiring an accountant can feel like yet another ongoing expense for your business.
• Requires trust - Relinquishing control of your finances can feel like an act of trust, and it may be unsettling to hand over your fiscal responsibilities to someone else.
• Over-dependency - When you hire an accountant, you accept that you’ll be more disconnected from your business finances.

Connect Wise Business to Your Accounting Software

When you choose Wise Business for effortless, cost-effective international transactions, you can connect your account to your accounting software for seamless bookkeeping.

You can easily connect a Wise Business account to accounting software, such as QuickBooks, Xero and FreshBooks. Your accountant will love how easy it is to connect Wise with their existing systems.

Open a Wise Business account online

A Wise Business account offers:

• No monthly fees
• International payments at the mid-market rate
• Easy batch payments
• QuickBooks syncing to track bill payments
• Multiple currency management in one place
• The option to receive payments like a local with major currency account details
• The ability to hold more than 40 currencies