Small Business Bookkeeping: Your First Steps
By Brielle Marcoux, CPA
CEO of Easeify Bookkeeping
Starting a small business is an exciting journey, but managing your finances from the get-go is crucial for long-term success. In this article, we’ll walk you through the essential first steps of small business bookkeeping, offering practical advice to help you build a solid foundation for your finances and set your business up for growth.
1. Choose the Proper Entity Type
The structure of your business can greatly impact your operations, taxes, and exposure to liability. The most common types of entities are:
Sole Proprietorship: Simple to set up but provides no personal liability protection
Partnership: Suitable for businesses that have more than one owner
LLC (Limited Liability Company): Offers greater liability protection while maintaining operational flexibility
Corporation (C-Corp or S-Corp): Provides liability protection and potential tax benefits but comes with added compliance requirements
Although it is usually possible to change your entity type later on, this can be disruptive and may come with negative tax consequences. You should carefully evaluate your goals for the near and long term before making a choice. It is also best to consult with a CPA or attorney to ensure you select the structure best suited for your business.
2. Separate Business and Personal Finances
Open dedicated business bank and credit card accounts to avoid blending your personal and business funds. This simplifies bookkeeping and allows for a clear audit trail.
3. Use an Accounting Software
Accounting software, like QuickBooks Online, is vital for efficient bookkeeping. It allows you to automate transaction tracking, categorize expenses, generate invoices, and pull financial reports. Choose a platform that suits the size of your business and your needs.
4. Store Receipts Digitally
Digital storage solutions eliminate the need to keep binders full of your business receipts. There are several options out there that make it easy to organize and retrieve receipts:
Use a mobile app that has a receipt capture feature
For online purchases, save and compile digital receipts in a cloud folder
The IRS states that supporting documentation should include the date, payee, amount paid, proof of payment, and a description of the item purchased or service received. This makes it easier to demonstrate that your purchases are for business purposes.
ABOUT THE AUTHOR
Brielle Marcoux is a CPA and the CEO of Easeify. Headquartered in Tennessee, she specializes in working with small businesses in QuickBooks Online. She offers one-time cleanup services and monthly bookkeeping services and works closely with BWM on their bookkeeping needs too! Are you interested in cleaning up your bookkeeping act? Brielle is ready to help the BWM community! Contact her to get started!
