Small Business Bookkeeping

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If you’re not already using an accounting software service like Quickbooks or Xero, it’s time to get started. A digital service will help you make heads or tails of your data entries and bank reconciliations, and give you a central location to house your business finances. Apart from being able to automate a lot of manual bookkeeping processes, these platforms will also help manage profit and loss statements, send invoices, and set up payroll (just to name a few).

While there’s no hard and fast rule for the minute details of payroll, if you’re a new business, you’ll most likely wrap your payroll function inside of your bookkeeping software. Streamlining these functions will make your small business bookkeeping very tight, and eliminate the possibility for inconsistencies in your records.

However, if you need options because you’re a little bigger than “brand new,” here are a few payroll platforms to consider: 

• Onpay
• Justworks 
• Gusto

Pro Tip: The R&D tax credit is often missed by small businesses.
See if you qualify >>

As a business, your taxes will depend heavily on what types of products or services you sell, how the structure of your business is arranged, and whether or not you intend to hire contractors or in-house employees. 

Here are the four types of taxes you’ll have to file: 

• Income Taxes: There are five types of businesses according to the U.S. government: Sole proprietorship, partnership, limited liability company (LLC), S corporation, and C corporation. By defining your business among these categories, you will know how to report your company’s income and expenses to the IRS. 
• Sales Taxes: If you sell products, this is the state-assigned tax you’ll collect from your customers. Since these numbers vary by city and county, you’ll need to keep track of the different fees based on multiple locations. Quickbooks has a great feature that easily helps you stay on top of these figures if you’re working with the software platform. 
• Self-Employment Taxes: If you are self-employed, these are the taxes that you have to pay the government if the income exceeds earning of $400 or more. These taxes go toward Social Security and Medicare and have quarterly deadlines rather than annual ones. 
• Payroll Taxes: If you are not self-employed, you’ll need to pay taxes on the salary that you pay your employees. In addition to filing payments, there are additional payroll requirements, such as i-9 documents, that must be completed to operate as a legal business. 

From configuring the best ways to file your expenses to making sure your line items are correctly attributed, working with a tax specialist early in the game is one way to ensure that your filing goes smoothly.

For additional resources on common small business bookkeeping needs,
problems, and solutions, try these resources: 

• Steps to Effective Cash Flow Management 
• 5 Reasons Why Your Startup Needs to Hire a Bookkeeper
• Why You Need Bookkeeping Services That Grow with Your Company

Before we dive into what you need to do, let’s start with some definitions.

What is accounts receivable? 

Accounts receivable is the money that is owed to a company by a supplier, and are generally noted as an invoice that has been ordered, but has not been paid for. Typically, these invoices are paid within an agreed-upon time frame. For example, a wholesale bakery that delivers fresh rolls to a coffee shop daily will have accounts receivable for services rendered. 

• What you need to know to set-up: Accounts receivable keeps track of what your business is being paid, so having a clear indication of your inbound cash flow is crucial. From preparing and sending invoices to providing statements, a reliable system for accounts receivable will help you manage your business accounts and grow for the future.

What is accounts payable? 

Accounts payable is the money that’s owed by a company to a supplier, and it will be shown as a liability on a company’s balance sheet. For example, a gym who buys sports equipment on credit will have accounts payable for the sports equipment. 

• What you need to know to set-up: Equally as important as keeping track of the inbound cash, you’ll need to ensure your business is paying the vendors, lenders, and landlords that expect payment on a regular basis. With a reliable account payable system, you can ensure your bills are being paid on time. Together, these functions are crucial to a successful small business bookkeeping plan. However, if you don’t want to be involved with the day-to-day handling of these functions, you may consider handing off your bookkeeping to someone else.