Bookkeeping Tips for Entrepreneurs

8 Bookkeeping Rules to Live By for Entrepreneurs and Independent Contractors

Have you finally decided to take the leap by starting your own business? Whether you are working as a contractor for other businesses or you are focused on getting a start-up off the ground, it is important that you are deliberate with the financial tracking and paperwork. These steps will set you up for success, increasing the likelihood that you will be able to stay in business for many years.

Living on Dreams, Preparing for the Future

Unfortunately, too often people start with big dreams. Then, they quickly run into problems because they weren’t willing to do the boring or difficult work, like tracking expenses, keeping up with tax payments, and saving for a rainy day.

Your big ideas will only last for so long until reality sets in. If you are going to put in the effort to start a company, then you need to be willing to take on the responsibility that comes with the American Dream. It is important that you make it a priority to keep up with accounting and bookkeeping business tasks so that you always have a clear picture about the profitably of your company.

The best thing that you can do is put together a system that will last into the future. These efforts will bring exponential benefits to your business. Not only will you rest assured to understand the financial health of your company, but you will also be preparing for future growth and expansion when you see a good opportunity.

Finding the Support that You Need

Don’t worry… you don’t have to navigate these things by yourself. The biggest mistake made by entrepreneurs or independent contractors is trying to juggle too many things at the same time. Even though you feel like you are bootstrapping to get the business off the ground, you can’t carry all the responsibility without support from others.

For example, it might be easy to think that you should handle all the invoicing and financial management in your free time. But, when does an entrepreneur have several hours to put into paperwork and transaction auditing? Your time is a valuable commodity, and you shouldn’t be spending your hours focusing on work that could be outsourced easily.

Plus, remember that you don’t have an educated background in accounting. Instead of trying to navigate the numbers and making mistakes along the way, you will be grateful that you hired the bookkeeping and accounting help that was needed to keep your company on track.

Benefits of Working as an Independent Contractor

If you must take on the bookkeeping and accounting responsibility, is it worth the effort to start a freelancing business? As you learn more about the benefits that are available from self-employment, it is easy to see why these additional responsibilities are worth their weight in gold.

These are some of the benefits that you can expect if you skip the traditional employment and choose to be an entrepreneur or independent contractor instead:

  • Manage your time, so you can choose the days and hours that you want to work
  • Shape your workload to focus on your strengths, rather than completing tasks because they are expected from your boss
  • Potential for higher income, especially when you are paid on a project basis instead of an hourly basis
  • You are your own boss, so you don’t have to report to anyone about your activities each day
  • Leverage tax breaks by writing off expenses that are related to running a business

Even though there are many benefits to self-employment, you will also experience a few disadvantages as well. For example, you don’t get employer-subsidized health insurance, paid time off, retirement matching, and other common employee benefits. Also, you will need to take on more tax and legal issues, but these things can be outsourced to a trusted team.

Bookkeeping Rules for Entrepreneurs or Independent Contractors

Whether you are already underway with your business efforts, or you are just getting started, there are a few bookkeeping rules that should be implemented into your financial system:

  • Rule #1 – Separate Personal and Business Finances: Even though you are fronting the money to get the business off the ground, you need to be careful about the way the money flows through your company. Set up a separate checking account and use a dedicated credit card for your business expenses. Some contractors find it helpful to have multiple business accounts so that they can manage overhead expenses, vendor payments, employee payroll, and more.
  • Rule #2 – Track All Expenses: Whether you are buying a new computer system or a cheap notebook, you need to keep track of every expense related to running your business. These expenses can be used as tax deductions, but you must provide the documentation showing the transaction. Keep a digital record of transactions throughout the month, and hold onto the receipts and invoices that you receive.
  • Rule #3 – Follow the Rules: Understand the laws and restrictions that impact your business activities, and make sure that you stay in compliance with these rules. For example, your accountant will provide information about quarterly tax payments, tax break strategies, and more. You should tap into their expertise and make sure that you are keeping your nose clean with the IRS.
  • Rule #4 – Keep a Backup of Your Financial Records: You never know when a hard drive will crash or paperwork will be lost. Even if you are careful about keeping records, it is a good idea to store backup information about your financial transactions. If the main records are lost, then you always have a copy as a reference in case there are questions about your business activities.
  • Rule #5 – Save for a Rainy Day: Business might be good right now, but it doesn’t mean that you can spend the money on unnecessary expenses. There is a real temptation to splurge on a new computer or office furniture when the money hits the bank account. But, you need to be prepared for future expenses, such as tax payments, payroll, inventory restocking, and more. Also, remember that many companies go through slow seasons at times. Even though you are enjoying the benefits of the busy season right now, you need to set aside some running money to keep the company going when things slow down in the future.
  • Rule #6 – Be Ready for Growth and New Opportunities: Creating a good bookkeeping system will ensure that you have the resources and systems in place to support future growth. If the right opportunity comes along, then you want to be ready to act so that you can expand your business. But, the only way to grow is to ensure that you have control over the finances at your current levels of business.
  • Rule #7 – Use a Cloud-Based Accounting Software: Ditch the paper ledger and spreadsheets. Instead of spending your time on manual accounting and bookkeeping calculations, leverage the benefits of a cloud-based accounting software. Not only will your accountant have access to the data in their office, but you can view reports and information from any location in the world. All you need is a good internet connection to check in on the financial health of your company.
  • Rule #8 – Don’t Be Afraid to Ask for Help: You don’t need to re-invent the wheel by trying to figure it out from the ground up. Instead, there is a lot of benefit to talking to other people who have gone before you. Find a mentor in the industry to learn from their experiences. Also, be open to hiring contractors and outsourced services that can support your efforts.

Talk to the Experts about a Financial Plan for Your Business

One of the best things that you can do is to stay focused on your business growth and management, instead of wasting your time with busy work and numbers crunching. When you understand the value of your time, then you will see the benefit of bringing in an outsourced accounting and bookkeeping team to help.

These services will free up your day and reduce your stress because you don’t have to worry about tracking individual transactions or figuring out how to run payroll. Plus, the experienced advice is a great way to maximize your results and prepare for future growth. We want to help you implement the best financial systems, based on years of experience helping other people who experienced the same challenges as you. By specializing in small business accounting, we can optimize our services to help entrepreneurs and independent contractors.

There are many benefits of self-employment, and you can take advantage of these benefits by tapping into the experts who can support your efforts. Here at Easier Accounting, we know the best accounting methods to support small businesses and entrepreneurs. Contact our team to learn more about the services that we offer. You can schedule a consultation to start the conversation, allowing us to cater these services to match your needs. We are here to help with all of the accounting and bookkeeping services that will support your business efforts: (888) 620-0770

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