Unless they have saved up the capital, or have an investor, many small businesses start out with limited cash flow. This often results in some hard decisions being made regarding what services can and cannot be included in the startup operations. However, if one cannot afford to outsource services, then the owner needs to be able to pick it up the extra duties. Today we are lucky to have plenty of solutions for owners that need to maintain their books on a limited budget.
The following three steps will help you get on top (and stay on top!) of your bookkeeping for limited or no money.
#1 – Get a separate bank account for the business
In many cases, it doesn’t have to be an official business account. In fact, I had temporarily opened a second personal account at my credit union before I took the steps to open a business account. The main point here is to have one bank account for your business transactions to keep separate from your personal transactions. That means please don’t buy personal items using your business debit card, and don’t purchase business supplies using your personal debit card or personal cash. It makes the work for you even harder, trust me on this. Store your business card in a different place in your purse or wallet than your personal cash, and set up a different pin to make sure you are aware of which card you are using. If cross-over happens (which happens from time-to-time) make sure to reimburse yourself or your business and notate it on the receipt.
#2 – Set Up an Accounting Software System that Utilizes Bank Feeds
This is where you can save a lot of time. You simply link your business bank account to your accounting software system, and it will download your transactions directly into the program. You will still want to review for accuracy, assign the expense, and approve each transaction regularly and reconcile monthly with your bank’s statement. These programs can also help streamline your invoicing process for your customers, getting you more money in the bank faster!
Which program I would recommend depends on what you need to be able to do with your business and your budget, but my recommendations would usually fall under cloud accounting solutions like QuickBooks Online, Xero, FreshBooks, or Wave Apps. Wave Apps is free to use, and I would say is an excellent option for businesses looking for free solutions. They devote a portion of the side of the screen to ads, and they have additional services, such as payroll and invoicing solutions, for a fee. However, the main product is completely free to use and very user friendly. In addition, they have a free expense app that allows you to enter your expenses directly from your phone, along with camera copies of your receipts, which makes step three a lot easier.
#3 – Dedicate ONE place for your receipts
My preference is to have all receipts stored digitally, especially since they have a tendency to fade over time. (Side note, the IRS doesn’t seem to care if your receipt faded. They still want to see proof, and your bank statement will probably not count since it doesn’t detail what you purchased.) I utilize QuickBooks Online phone app to take pictures of my transactions as they occur, so I have copies of my receipts safely stored in the cloud and attached to my transaction in QBO itself for easy reference. Many cloud accounting programs have this feature. Or you can use a third party program like Expensify, Receipts Bank, HubDocs or Shoebox, but those may have additional costs to integrate directly to your accounting program. Although the digital copies should be sufficient in the case of an audit, I still keep the hard copies in a file for seven years, just to keep all my bases covered.
Another method is to keep receipts in a designated area of your wallet or a poly folder in your car. Then you regularly pull them from their temp storage location to enter them into the system, and next transfer them to a file in your office after they had been entered. This can work, but I encourage the process to be done as close to daily as possible. Receipts have a tendency to disappear quickly if a consistent process isn’t followed.
Of course, in the end you will still need to set aside a little time every day or week to stay on top of your bookkeeping. You can set up the bank feeds and automate much of the process, but you still need to review the transactions and reconcile the accounts.
It is a good idea to consult with a professional when setting up the books and getting some training to get your started on the right foot (see our list of services). This will help you improve your speed and decrease the amount of time and money for catchup and clean-up services around tax time.