Thanks to our friends at Bench for compiling these useful hacks to help startups. As an online bookkeeping service, Bench is a pro at helping startups and entrepreneurs streamline their financials. They've provided great service to a number of Stacklist startups and, in this guest blog, they share great advice with the broader Stacklist community.
Let’s face it: managing your startup’s books is a dry but essential task. While you’ll never fully escape the need to keep your company’s financials up-to-date, the less time you spend on bookkeeping admin each month, the more time you’ll have to focus on other initiatives that grow your business.
Here are seven of our best bookkeeping hacks, to help you save time on your monthly back office admin.
Automate Menial Tasks
Automating tasks will save you time, money, and simplify time-consuming aspects of your business. With a wealth of online apps and services at your disposal, it’s easier than ever to use automation to your advantage.
Here are some time-consuming tasks you should consider automating:
Payroll and Employee Benefits: Managing payroll and employee benefits is a full time job unto itself. Companies like Gusto, Justworks, and Paychex put your company’s payroll and benefits in the cloud. Employees can on-board themselves, signing up for access to W-2s and pay stubs.
Bookkeeping: If bookkeeping is taking you away from important tasks that grow your business, it’s time to outsource the task. Unlike DIY accounting software, Bench (full disclosure: that’s us!) pairs you with with a team of professional bookkeepers, who do your bookkeeping for you.
Invoicing: Gone are the days when you needed tracking and managing invoices manually, check out FreshBooks. The online app automates the invoicing process, nudges clients about overdue payments, and lets your clients pay invoices online. For tips on automating other time-consuming tasks, check out our guide to small business automation.
Plan Ahead for Tax Season
Tax deadlines can leave you scrambling to get your financial data together. Don’t let them sneak up on you: By setting reminders for yourself in advance, you can guarantee you’re prepared for whatever deadlines you have to confront, and eliminate the nagging sense that you may be forgetting something important.
As well as entering the dates in your calendar, you can schedule your own reminder emails with an app such as Boomerang for Gmail. Make sure they go out two weeks in advance of the deadlines themselves. To get a handle on which dates you need to watch out for, check out our article on tax deadlines for small business.
Separate Your Finances
Sole Proprietors are the only business type permitted to commingle personal and business finances in the same bank account. However, no matter your business’s legal structure, we strongly advise you to keep business and personal finances separate.
By mixing personal and business finances, you can potentially cause havoc (and headaches) when it comes time, to report and deduct business-related expenses. For instance, at tax time you may need to determine whether a restaurant meal you paid for six months before was for a client or for your spouse. Or, if you’re audited, you may need to painstakingly backtrack through your statements and identify the business expenses that are under scrutiny.
By relegating personal and business expenses to different accounts, you won’t have to deal with these problems.
Further, in the event of an audit, having intermingled business and personal finances makes it harder to prove to the IRS that your business is, in fact, a separate entity, and not just a tax shelter. If you haven’t separated your finances yet, our step-by-step guide to separating personal and business finances will help you through the process.
Organize Your Finances in Separate Business Bank Accounts
You should be using a business checking account for daily expenses, as well as receivables.
Setting up a business savings account, and use it to save a portion of your income for taxes and emergency expenses. This will help you keep your finances organized and prepare you for tax season.
It’s also worth your while to apply for a separate credit card for your business. The right company credit card can help you build a good credit rating for your business, making it easier to apply for loans later on. If your expenditure is high enough, you can also use a business credit card to amass cash-back bonuses, which you can reinvest into your business.
The IRS accepts electronic records. To avoid paper receipts piling up around you, go digital. Expensify and Shoeboxed are great for tracking and storing tax receipts and small business records; you can upload documents to either app using a scanner or smartphone camera. Keeping everything stored in the cloud can make it easier for you to store and access your documents.
While you’re at it, notify your bank that you want to receive electronic statements, and cut back on incoming snail mail.
Make Year End Tax Moves
When the end of the financial year looms, business owners are often too busy worrying about dealing with the holidays and getting their financials in order to recognize what December 31st represents: a great opportunity to save on taxes.
There a wealth of financial maneuvers you can make before the end of the year that help you save on taxes.
Common year-end tax moves for startups include:
Salvaging Bad Debt: If you are unable to collect invoice payments, or other money owed your business, you can deduct their amount from your gross income.
Repairing Your Office: If something in your office needs fixing, take care of it before the end of the year in order to deduct the cost on your tax return.
Starting a New Venture: Certain business start-up expenses are deductible. If you’re thinking about launching a new business, you might want to do so before year-end. If your start-up expenses are under $50,000 you can deduct up to $5,000 in start-up costs during your first year of business. If you incur over $50,000 in start-up costs, your available first-year deductions will be lowered by the amount that you exceed $50,000.
It’s wise to speak to your CPA well before December to identify and plan the specific year end tax moves available to your startup.
Take Advantage of Your Home Office
When you’re bootstrapping, working from a home office is a great way to cut back on overhead. Plus, if you plan carefully, you can use your home office to save on taxes.
Note that your home office has to meet certain qualifications in order to qualify as a tax deduction.
For example, if you own your home, depending on the percentage of square footage your office occupies, you can deduct an equivalent percentage of your mortgage payments on your tax return. If you’re renting your home, you can deduct an equivalent percentage from your monthly rent.
On top of that, you are also frequently able to deduct some of the cost of home repairs and renovations on your tax return.
For more information on the subtler nuances, check out Bench’s article on making the most of home office deductions.
Put these hacks into practice to streamline your bookkeeping admin asap. The time, money, and stress you’ll save each month will help keep your startup on track for success, especially during the critical early stages of growth.
About the Author
Bryce Warnes writes for Bench: the online bookkeeping service that does your bookkeeping for you. Stacklist readers get 20% off their first six months with Bench. Claim your free trial today.