Every year in January, my husband (business partner) and I break out a pen and pad of paper and make goals for my business. These goals range anywhere from adding staff members to trying out new software, increasing the number of clients, and monthly and yearly financial goals. While these goals are all significant to the success and growth of our business, one of the thing that we do that I believe is equally as valuable is we write down what went “wrong” in the previous year, and we make plans for correcting this in the new year. As small business owners, we have to manage every aspect of the business, and we realize that at times we will make some mistakes – but the most important thing is to learn and correct these mistakes so we can be successful moving forward.
Over the year, as new clients reach out to me, I always make notes on what the biggest challenge is in their business and how I can help resolve the challenge. More often than not, the business owner is contacting me because they fell behind on their bookkeeping and they need help immediately to get their books in order. They don’t know how much they’ve made (or spent), and it’s crippling the financial stability of their business. While I love the giving a client the feeling of relief by bringing their books up to date, I always share these three tips for making their bookkeeping process successful moving forward.
1. Set a meeting with yourself every month.
You wouldn’t cancel a meeting on a client, would you? Treat this meeting like you’re meeting with a new client. While clients are necessary to have a business, you are the most important person in your business and you need to treat the meeting like you’re meeting the person responsible for the success of your business. When the meeting time arrives, go to your office or a coffee shop and get your bookkeeping done for the month.
By scheduling the bookkeeping meetings at the beginning of the year, you’ll be mentally prepared to set aside the time needed. After a couple months, it becomes old habit and just another thing on your to-do list. If you keep pushing your bookkeeping to the bottom of your list, it will snowball and feel unmanageable.
2. Create monthly folders for your receipts (digital and physical).
I don’t know about you, but when I get home from a business lunch meeting, that meal receipt has a 50/50 chance of getting lost in the depths of my purse or making it up to my office. The last thing that I want to do when I’m sitting down to complete my bookkeeping is search for receipts. Losing receipts gets me off track and will almost double the amount of time it would take to complete my bookkeeping. To increase my odds of rescuing receipts from my purse, I label 12 envelopes with each month. I keep the current month’s envelope in my purse or in my kitchen so it’s a no-brainer when I get home and have receipts to file.
For digital receipts you can set up folders in your email where you can save receipts as soon as they hit your inbox. Since the IRS accepts digital or paper receipts, don’t feel like you have to print out every emailed receipt.
Every month, when you have your bookkeeping date, make sure you export your emailed receipts to PDF format and save in a secondary location. I’ve heard horror stories of emails being hacked or history being deleted and then losing all of that important documentation. While it’s an extra step to save your documents in another location, it will give you peace of mind.
3. Create a separate savings account to save for taxes.
If your business is making money, you will have to pay taxes. When saving for taxes, the key is “out of sight, out of mind.” By creating a completely separate account from your day-to-day business operations account and transferring a portion of your profit to this account, you’ll be less likely to spend the money that you’ll need to pay for your taxes. I typically recommend setting aside 30% of your profit for taxes.
Setting up the account is simple. Go to your current bank and let them know you want a business savings account. Make sure the account has a limit on transfers out so that you aren’t tempted to take money out for personal use, only for tax payments.
And, Don’t Forget to Celebrate your financial success!
These three tips will help set you up for success when it comes to saving for taxes and help ensure you never have to feel that awful feeling of not having enough cash when it comes time to pay your taxes. Take time to reflect on your goals and make adjustments as needed. As small business owners, we will make mistakes – the most important thing is to learn and correct these mistakes so we can be successful moving forward. Don’t be afraid to ask for help from an expert when needed.