As a small business owner, keeping track of your finances can feel like chore. However, bookkeeping is the secret sauce to running a successful business. The problem is that so many entrepreneurs fail to prioritize bookkeeping and do it last minute. You may think that it is only important when tax season comes around, but it is key to ensure you are running a profitable business!
In this podcast episode, Yaremi from QB Numbers breaks it all down, explaining why bookkeeping isn’t just about taxes. It is about positioning your business for growth. She shares practical advice on DIY bookkeeping and other bookkeeping tips, knowing when to hire help, and the power of financial awareness.
Bookkeeping vs. Accounting: What’s the Difference?
When you hear bookkeeping and accounting, you may think they mean the same thing and are interchangeable. I thought the same. However, although they do similar things, they are different. Yaremi clears up the confusion:
- Bookkeepers handle the daily grind. They are in charge of tracking transactions, categorizing expenses, and keeping records in check.
- Accountants take it to the next level. They analyze the financial data, cam offer strategic advice, and prepare tax returns.
In other words, your bookkeeper is the one making sure your financial “house” is in order so your accountant can come in and make it shine. They work together to help your business stay on point!
Why Neglecting Your Books Put’s Your Business at Risk
Again, many small business owners and entrepreneurs put bookkeeping on the back burner. I get it! It is hard to run your business and it is tempting to prioritize the tasks that are bringing in the income. This is especially true when you wear multiple hats in your business! But not doing your books until tax season can hurt your business.
Yaremi compares it to ignoring your health. Would you skip doctor visits until you’re seriously sick? Probably not. Yet, so many entrepreneurs do the same with their finances, only paying attention when things go wrong.
Here’s what can happen if you don’t stay on top of your books:
- Missed deductions: Waiting until the last minute can have you leaving money on the table. This is because you may lose receipts or just forget what you purchased 6 months ago.
- Late tax filings & penalties: Putting off your books, means you are doing them last minute, close to the deadline. This puts you at risk of filing late. Nobody wants an angry letter from the IRS.
- Cash flow issues: If you don’t know what’s coming in and going out, you’re flying blind. How do you know what is working and what is not?
Being proactive with your books isn’t just about staying compliant, it’s about making smart, strategic money moves.
How to DIY Bookkeeping
I get it. Sometimes your business is not there yet to hire a bookkeeper. Yaremi shares a straightforward system to keep your books in check:
- Set up a simple spreadsheet: Keep it simple. Find a simple spreadsheet to help you track income and expenses in clear categories.
- Update it regularly: Don’t wait until the end of the month! Schedule out some time each week or month to update your books.
- Separate business & personal finances: Make sure you have a dedicated business account.
- Save for taxes: Don’t forget about Uncle Sam! Set aside a percentage of your income so you’re not scrambling when taxes are due.
This simple system helps entrepreneurs build good financial habits and avoid surprises down the line.
When to Hire a Bookkeeper (and How to Find the Right One)
DIY is fine when you are a small business, but there comes a point where you will have to delegate this task. In order for you to focus on growing the business, you can’t continue to DIY. But how do you know when it is time to turn over the reins? How will you find the one that is right for you?
Signs You Are Ready for a Bookkeeper:
- You’re spending more time on finances than growing your business.
- You’re neglecting the finances because you are busy running your business.
- Tax season feels like a nightmare and gives you a sense of doom because your records are a mess.
- You don’t feel confident in the business decisions you make because you have no idea how the numbers look in your business!
TIPS to Find the Right Bookkeeper:
- Interviewing multiple candidates: Catch a wide net and interview several.
- Expertise: Make sure they are experienced in your type of business.
- Willing to Educate: Make sure they are willing to educate you. Also, if they can’t explain financial reports in simple terms, keep looking.
- Check references: They should have happy clients that are willing to tell you about their experience with them.
Running a business is stressful enough, but finding the right bookkeeper will save you time, money, and a whole lot of stress.
Final Thoughts & Tips
Finally, Yaremi gives some final thoughts and tips when it comes to bookkeeping.
Tips for Bookkeeping
- Meet with your bookkeeper monthly
- Review financial reports and catch errors early
- Ask questions about line items you don’t understand
- Make adjustments to increase profits and reduce costs
However, Yaremi emphasizes that even if you have a bookkeeper, you need to stay involved. This is crucial as you are the one who knows the ins and outs of your business. Because at the end of the day, bookkeeping isn’t just about taxes, it’s about setting your business up for long-term success.
Whether you’re DIYing it or hiring a pro, taking control of your books is a game-changer. So don’t wait! Get out there and start organizing your finances ahora!
About Yaremi Arenas
Yaremi Arenas is founder of QB Numbers, a bookkeeping service that provides monthly, quarterly bookkeeping and more to entrepreneurs and small businesses. QB Numbers gives freedom of time to it’s clients, empowering them to focus on nurturing their businesses.
Where to find Yaremi:
- Website: www.qbnumbers.com
- Instagram: qb.numbers
FAQs
1. Can I do my own bookkeeping, or do I need to hire someone?
DIY is very doable. Start on your own using a spreadsheet or bookkeeping software. Remember, as your business grows, you want to hire a professional so you can focus on your business and make sure your finances are on point!
2. How often should I update my bookkeeping records?
Pick a frequency that is doable. Depending on the type of business you may need to do it weekly, biweekly or monthly. Just make sure to do it often enough when the information is fresh!
3. What’s the best bookkeeping software for small businesses?
QuickBooks is the most popular. You can find a great comparison of different softwares and pricing in this blog.
4. How do I separate personal and business finances?
Glad you asked! Open a dedicated business bank account that you will use only for your business. Avoid mixing personal use.
5. When should I hire a bookkeeper?
Deciding when to delegate can be hard. But if you are spending numerous hours on your books that could be used in growing your business, then it is time to hire it out. Once, your finances start to get complicated, you want to get a professional to help you keep everything legal and ensure you have the right data to make business decisions.
