Smart money management is a key component to a successful foundation for any business, no matter the scope of revenue that company brings in. With careful and consistent bookkeeping practices, these records provide a true representation of your profits and losses. Building a consistent bookkeeping practice allows small-business owners to focus more time and energy on growth. Here are some best practices to keep in mind when establishing a practical bookkeeping system.

Separate Personal and Business Expenses

Intermixing business and personal expenses is a newbie mistake for small business bookkeeping. One of the first steps you should take as a business owner is to separate your finances by opening a business bank account and securing a business credit card. This move helps to clarify the lines between personal and business expenses that could possibly trigger an IRS audit; it limits your personal liability should your business ever get sued; it simplifies the bookkeeping process; and it helps your business build its own credit rating.

Track Business Expenses and Revenue

Tracking every expense with receipts is important for tax purposes and profit monitoring. Additionally, when you track and categorize your expenses and revenue streams, you are better able to pinpoint trends in strength or growth based on recorded data. Accounting software programs, basic spreadsheets like Excel, or even a pen-and-paper ledger can get the job done, but it’s imperative that you’re consistent with your bookkeeping method.

Schedule Weekly and Quarterly Reviews

Perform regular financial checkups so that you don’t run into bounced checks, overdue invoices, or numbers that don’t add up. Go over your books weekly to make sure everything is in good order. Also analyze your bookkeeping and accounting records at the end of each quarter. Keep an eye out for trends, such as increasing or decreasing sales, year-over-year revenues, or an influx in consistently overdue invoices by customers.

Budget for Major Expenses

Accurate bookkeeping not only helps you gauge realistic financial goals for your business, but it gives you a clear picture of your savings reserve and resources should you be faced with an unexpected expense. This is why having separate business and personal emergency funds is always a good idea. Aim to save enough cash in each account to cover three to six months of expenses. You might not be able to predict the future of your business, but you can plan for major expenses in a way that will give you peace of mind.

Plan Throughout the Year for Personal and Business Taxes

You can typically prevent surprises and errors when it comes to your small-business taxes by preparing throughout the year for these major taxes:

• Income tax: The method by which you’re obligated to pay income taxes depends on how your business is structured legally. For example, if you have a sole proprietorship, your business taxes are paid as part of your personal income tax known as “pass through” taxes. However, if you have a structure like a Limited Liability Company (LLC), you’ll owe self-employment taxes and no corporate taxes. Be sure you understand the tax implications for your business according to its legal structure.
• Payroll tax: If you have employees, you need a Federal Employer Identification Number (FEIN). If you operate across more than one state, you will also need a State Identification Number for each state in which your business operates. Payroll taxes are deposited either semiweekly or monthly and reported quarterly.
• Sales tax: If your business moves product, you need to collect sales tax from customers. These taxes vary by state, county, and city. If you sell online or across multiple locations, consulting a tax professional may be a smart move to ensure that you’re collecting sales taxes correctly.

Get Help from an Accountant

Even with a robust accounting software program, the likelihood of user error is strong. Accounting professionals offer experience in evaluating records and finances to be sure they are accurate and organized, and they can help you make smart financial decisions with your business. The time you commit to bookkeeping could be better spent brainstorming new ideas and growing your business.