If you are in business for yourself, it won’t take long before you discover how easily paperwork becomes out of control. Even if you are running things alone and even if you are just starting off and even if you aren’t making any money (particularly if you aren’t making any money), keeping accurate and timely records in your business is absolutely essential. It is one thing to have trouble with an angry customer. It is something else all together to have an angry IRS agent!
Before you spend one dime in your business, figure out how you are going to set up your accounting system. This is probably going to involve some time of computer program (and there are plenty out there). It will also involve figuring out what kinds of things are you are going to need. Do you have invoices? Accounts receivable (i.e., will people owe you money)? Employees (and thus payroll)? Accounts payable (i.e., will you owe people money)? Certainly you will be buying things. Do you need to worry about depreciation? Leases? As you can see, the list can become daunting very quickly.
Don’t panic! Once these systems are set up, it is usually pretty easy (if a little tedious) to keep track of things. The key is setting up a system that is easy to use and that you understand. Using a bookkeeper or accountant may be a wise investment. At least get one to help you set up your systems. Generally a bookkeeper can do this for you. It will be well worth the money and will save you a ton of headaches, especially at tax time. Find one that is familiar with your type of business. Not all businesses have the same rules and regulations for taxes, etc. Also find one that is willing to take the time to explain things to you. Even though accounting is really just keeping track of money, it can be fairly complex and you need to be sure you understand what is going on. If you get into trouble with the IRS, they are going to be looking at you, not your bookkeeper. You are ultimately responsible for the finances of your business.
The second key is to keep things current. Waiting six months to enter receipts can make the task seem overwhelming. If you find yourself having trouble keeping up, you might wan to consider using a bookkeeper, at least on a part-time basis. You can usually find one that can work with you, even if you only need them for an hour or two a week. Generally speaking, it is not worth your time to spend a lot of time doing data entry when a bookkeeper can do it much more effectively and efficiently. If you get too far behind on your paperwork it is also difficult to know where your business is financially and that can be dangerous.
No job is complete until the paperwork is done. You work hard on your business. Don’t let it get off course by not keeping track of your finances.
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