Why keeping your books matters

Restored from the Empower Network archive (2011–2017), lightly edited to meet our current advertising standards. Views are the original author’s.

It has been said that the key to getting ahead is getting started. This is very true for bookkeeping for a work-at-home business or any small business that is poised for success. After developing a system for bookkeeping, maintenance is quite easy. You don’t have to be an accounting professional or even have prior knowledge on bookkeeping in order to keep correct records.

Importance of bookkeeping

Bookkeeping is the first step in reporting, clarifying and analyzing your business data. Keeping your financial books well organized makes it easy for you to generate financial statements at the end of the month. Moreover, you are able to tell how efficiently and effectively you are spending your hard-earned cash. There’re a couple of other reasons why your bookkeeping matters:

1. As a small business owner you may require external capital for expansion at some point. Lenders and investors will need copies of complete and accurate data before they can finance your business.

2. Accurate financial data helps you to manage your company’s financial health. You are in a position to determine which customers have arrears and when they are making payments or your level of outstanding balances. Without correct records, cash flow management is an impossible task.

3. Taxes. Accurate bookkeeping helps in accurate calculation of taxes and documentation for tax credits and deductions.

Bookkeeping instructions for your work-at-home business

1. Record your income

Itemize all your streams of income and come up with a way of keeping accurate records. If you are involved in selling items online, use a spreadsheet program (such as Open Office or Excel) that has fields for price, date, description, tax, payment method, postage paid, and postage charged. For easier recording, make a copy of the all mailing addresses and mark each item and corresponding price to the side. Use this data to make entries into your spreadsheet. In case you are having other income sources, maintain a monthly and annual total of the income. This will keep you in good terms with the IRS.

2. Record your expenses

File all expenses receipts for each month. Record expenses incurred in automobile use. This is an important tax deduction that will reduce your annual income taxes.

3. Calculate total monthly income

Record the total income from all your sources. This simplifies the task of calculating annual figures because you only need to tally twelve entries.
4. Compile an annual income report

Using the entries generated from the monthly totals, compile an end of year report. Be sure to include the summation of income from your various streams. Determine collected tax on State sales in case you have not been filing your quarterly report.

5. Calculate end of year expenses

Using the files you created for expenses get the totals for all categories. This should include total expenses incurred in advertising, utilities, office expenses, and internet services among others. You do not need a monthly expenses report; you can simply file the receipts and get a total at the close of your financial year.
These easy to follow steps will make filling income tax reports and sales taxes easier and ensure you are running a profitable business.