Why is cleaning up a financial mess important for small businesses? This one mostly goes without saying: no one wants any type of mess in a small business because resources are stretched thin as is. But a financial one? No bueno. The IRS requires you to keep receipts for expenses over $75 for seven years. This is actually one of the first ways small businesses begin to slide down a slippery slope. How would a small business know they are falling behind financially?
You’re losing money.
One common issue for small businesses is that even though sales have begun to rise, profit isn’t visible. That usually points to a profit margin issue and can be analyzed through the use of good financial reporting.
You’re losing time.
If dealing with the financials is taking 20% or more of your time, distracting you from things like customer service or product/service enhancements, your financial records could probably use a little more organization.
You can’t figure out what you need to.
Because the bookkeeping is off, you’re unclear on margins and the performance of various aspects of the business.
You have too many accounts.
More on this in a second, but having multiple accounts (business/personal, usually)that aren’t reconciled is often an issue come tax time.
Finances are a high source of anxiety.
The best small businesses look at their finances and do that fist pump from Napoleon Dynamite. If you’re viewing your financials and wanting to cower in the corner, it’s a financial mess. Time for a bookkeeper!
When a small business has fallen into a financial mess, a dedicated bookkeeper will:
Gather records: By collecting all receipts and invoices related to the business, including customer invoices, debt collections, business purchases and vendor bills, the bookkeeper will be able to help your small business paint a more accurate picture of its financial landscape. There are also a growing number of small business tax deductions that can benefit your business, and a bookkeeper can often alert you to some you may not be aware of.
Reconcile bank accounts: A bookkeeper can accurately compare each transaction from your bank statement with the same transaction in your company’s financial records to ensure the balance of each account is the same. If it isn’t, the bookkeeper can identify and resolve any errors to ensure that the balance in your bank statement matches the balance in your company records.
Separate personal and business expenses: Keeping personal expenses in addition to business expenses in the same account usually has negative tax implications. If you’re unsure about whether a purchase is a deductible business expense, visit the IRS website. (You can also learn how to open a small business banking account.)
Collect W-9s & Create W-2s and 1099s: If you’ve paid any employees or independent contractors during the year, you’ll need to handle these forms.
Once you’ve realized that your business’ finances are in disarray, it can be a challenge to figure out how to get back on track. Hiring a professional bookkeeper can help put things in order again, leaving you the freedom to manage your business’ core functions instead of stressing over money.