Last Updated on September 5, 2022

The useful bookkeeping tips for small business owners

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One of the common challenges of many small businesses is keeping their financial records straight. While some business owners ignore it, some struggle to keep it. No matter the category you belong to, this article on bookkeeping tips for small business is for you.

It doesn’t matter the strength or weight of your business.

As far as you’re running one venture where money and goods change hands, you need to keep records of the transactions.

That way, you won’t operate blindly but be positioned to tackle every challenge that arises in doing business.


We’ll share some tips on how to handle your small business bookkeeping to keep your business growing and to expand.

So, keep reading and turn things around from today.

What are the benefits of bookkeeping?

Bookkeeping is the lifeblood of every small business.

It involves a process of storing and organizing your businesses’ financial & accounting documents such as financial statements, ledgers, income tax records, journals, etc.

If you want your business to be financially healthy and capable, make sure that your documents are accurate and up to date.

That way, you can quickly identify the success or otherwise of your business.

There’re many benefits of business bookkeeping you shouldn’t miss, such as:

  • Quicker financial analysis
  • Ability to predict your tax faster
  • Improved relations with your investors and the banks
  • Faster planning process for your business
  • Access to detailed and up-to-date business records.

Bookkeeping tips for small businesses:

Keeping business accounts helps the owner to have accurate information about the performance of the business.

They also help an accountant to their jobs of preparing your financial statements.

So, you should make sure that you get it right by doing the following:

1. Use a separate account for business transactions.

Opening a business bank account is the first thing you must do for your new business.

It also improves your business bookkeeping efforts.

At least, you can differentiate between your funds and business funds easily to aid your record-keeping purposes.

Another advantage of this is that a business account will help you maintain a budget, organize your accounting records, and manage the business finances well.

a calculator with some accounting records as bookkeeping for your business
Image by Steve Buissinne from Pixabay

But if you go ahead to mix things up because you own the business, you’ll end up achieving nothing.

For instance, you’ll never find it easy to maintain proper bookkeeping when all the expenses are all happening in one account.

Also, if you employ someone else to manage your books, the chaos will lead to a complete disaster because the person will be confused about how to separate the two.

If peradventure a bookkeeper agrees to work for you, be ready to pay exorbitantly for the time it’ll take to arrange your records.

So, it’s best to keep things in order before ending up in a web of confusion.

Apart from opening a business account, we recommend you take a step further to open both a savings account and an online account.

The savings account will be where you can save some money from the business for tax payments.

But the online account will help you to complete transactions faster and also have a record of all you did.

2. Categorize your expenses

If you’re running a small business, there’s a chance that you may use your business funds for personal expenses.

It’s practically unavoidable, but we recommend that you recognize when you’re spending for yourself and when you’re spending on the business.

And even better to spend your small business funds as a form of salary to yourself.

It’s dangerous to spend money from your business account on every whim because you’ll never know when you use your capital.

So, to avoid all that, it’s best to decide on a specific amount for your expenses.

When you do that, we recommend you move it into your account and spend it from there.

If you can do it that way, your business bookkeeping will be more orderly.

At least, that amount will be a recurring expense that you can add to your books as personal expenses.

With that, your business bank statements will contain transactions that relate to the business only.

Another important aspect is the funds you used from your account to make business purchases.

These types of inflows should be recorded in your business journals.

If you do that, it’ll help you reduce your yearly tax since the money is not a business profit but a personal contribution to the business.

3. Always document every business transaction.

You can’t achieve good accounting results if the source documents are missing.

If you hire a good accountant to tell you where your business stands financially, they’ll need to get every document containing the business’s financial transactions.

An accountant will need these documents to track your business dealings and as proof to auditors or tax agents.

Sometimes, before you can succeed in paying your tax, you may have to present your 5 or 7 years of business documents.

The tax department will need your receipts, invoices, wage records, etc., to back up your tax claims.

In such instances, if you’ve been ignoring your records, you may end up paying higher than what you should.

So, if you want to be on the safe side, make sure you have an organized filing & archiving system to keep your documents together.

Don’t do what other small business owners do by littering pieces of invoices, receipts, etc., all over the place.

a computer with some receipts
Image by Pexels from Pixabay

Instead of that, save more time by keeping them safe.

You can either adopt a paper system where every piece of paper has a place, or you can store your records on the hard drive of your system.

Some people also store their documents online to ensure safety.

Study the options available and choose the one that suits you.

4. Send invoices faster

One of the bookkeeping tips for small businesses that you shouldn’t ignore is to send out your invoices fast.

Maybe you don’t know, but if you want to keep your records straight and accurate, you need to get payments on time.

If you have to wait for months to get paid for a service you’ve rendered, how will you record it?

So, we encourage you to always send out your invoices once you’ve completed your jobs.

That way, the inflows will come as at when due.

Delayed payments will confuse you and mess up your financial records.

5. Track your cash payments efficiently.

Business bookkeeping is sometimes more difficult for businesses that get cash payments.

The reason is that many small business owners have this habit of making purchases without plans.

If you’re always taking out cash to buy supplies, you’ll end up losing track of your inflows and outflows.

In such a chaotic operation, even an experienced bookkeeper will have a hard time organizing your records.

So, we recommend that you pay in every cash into your business bank account before using it for purchases.

That way, you can easily identify the inflows and the outflows.

You will also know the customers that have paid and when they paid to avoid issues.

Moreover, making unplanned purchases can confuse you during bookkeeping.

If there’s no record of such expenses, you may not know how you spent certain amounts of money that came into the business.

The worst is that your taxes may be higher than normal because there’ll be a record of inflow, but no one will remember the unrecorded expenses.

6. Hire a bookkeeper.

This is one bookkeeping tips for small businesses to consider seriously.

Even though your business is small, it may be overwhelming to handle everything yourself.

Many small business owners act as office admin, marketers, operators, etc.

In such a setting, it’s not easy to also work as a bookkeeper effectively.

So, it’s best to hire someone to man everything about your business bookkeeping.

You may not know, but when you hire a bookkeeper, you’ll end up saving more money and keeping accurate accounts.

With him or her, you can avoid so many mistakes that’ll cost you money.

Your books will also be accurate in representing the true state of your business for both tax reasons and expansion goals.

Other areas that your bookkeeper can assist are:

  • Keeping your cash book accurate
  • Preparing every sales invoice as at when due
  • Making sure that every purchase invoices is recorded and filed
  • Processing your bank reconciliation statements for all the business’s accounts
  • Preparing every business reports such as creditor’s reports, sales report, payroll tax reports, monthly reports
  • Processing your employee payroll and ensuring timely payments
  • Handling every tax-related matters
  • Keeping in touch with debtors who’re delaying their payments
  • Bringing ideas on improving cash flow
  • Informing you of the financial status of your business.

Apart from all the above, your bookkeeper can help you prepare your yearly budget and help out with banking issues.

7. Check your book always.

If you’re not handling your business bookkeeping personally, make sure to check what the administrator is doing.

Don’t leave everything to him/her even if you think they know more.

The lifeblood of every business is finance.

If there’s no money to buy goods, employ hands, or even run an office, you’re out of business.

Many businesses failed today because the owner thought everything was okay without paying attention to the finances.

So, if you don’t want to be taken by surprise, make sure you’re on top of your business finances.

Besides, the person you entrust your business accounts to can end up duping you.

Therefore, run checks every month to know what’s happening in the bookkeeping department.

Don’t trust only one person to be in charge of every inflow and outflow of the business.

Share the responsibilities between two or more people depending on the scale of your business.

That way, you can discourage fraud from your staff.

8. Invest in a bookkeeping software

This is one of the bookkeeping tips for small businesses that business owners in this era appreciate.

Technology has simplified the way we live and work.

So, you can find applications for everything you want to do.

a computer with software
Image by Tayeb MEZAHDIA from Pixabay

That’s why we recommend that you search for a good bookkeeping software to use.

There’re many bookkeeping software that handles a different aspect of bookkeeping.

For instance, you can find software for cashbook records or bookkeeping software for both the cashbook and the ledger.

Some bookkeeping software can handle everything, including cashbook, ledger, POS, foreign currency transactions, and inventory.

So, it all depends on what you want when choosing the best bookkeeping software.

If you’re operating on a tight budget, you can start with the free software.

But if your finances can carry the extra expenses for better business bookkeeping, get a bookkeeping software that can handle everything you need.

How to organize small business accounting?

Many people sometimes forget the differences between accounting and bookkeeping.

To achieve accurate accounting results, you must present correct records of your transactions, including inflows and outflows.

The bookkeeper is responsible for clearly recording all these transactions while the accountant uses it to build the financial statements.

So, while we focused on bookkeeping tips for small businesses in this article, let’s share some tips on organizing small business accounting.

  1. Open a business account; very important for every business. Once you do that, try to get your business credit card. Your business credit will be a source of funding when you need emergency funds for your business.
  2. Record every expense; an accountant needs the record to prepare your financial statements.
  3. Ensure your bookkeeping system is useful; without accurate books, your accountant will not know where to start.
  4. Choose a payment method; you need an easy-to-track payment method for your business.
  5. Employ an accountant; while some people may opt to do their accounts themselves, hiring an accountant will make things easier and more accurate.
  6. Get accounting software; if you’re not sure about hiring an accountant, why not invest in good accounting software. There’re many accounting software in the market, both the free ones and the premium ones. If you’re someone who’ll love to run your business finances, accounting software will make it happen. It can track your invoices, reconcile your account, pay bills, and handle other accounts-related aspects of your business. But when deciding on the accounting software to use, search wide to get the one your use. However, you can hire an accountant to set up the software for you and also teach you.

Final Words

Business bookkeeping is sometimes rigorous, time-consuming, and stressful.

Many people ignore this aspect of their business due to the hassles involved.

But whether we accept it or not, every business needs finances to operate.

So, ignoring it is a surefire way to pack up shop.

In this article, we’ve shared proven bookkeeping advice to help small businesses survive for a long time.

Many of these bookkeeping techniques are what the big shots are using to organize and keep their financial department alive.

We encourage you to start today.

As for the workload, you can employ someone to handle your business bookkeeping, or you can invest in bookkeeping software.

Don’t ignore your books because if you hire an accountant tomorrow, he/she will need them to determine the actual state of your business.

Also, even if you’re using any accounting software, you’ll need to input data for it to work.

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