How do I start on the right foot with keeping track of my finances?

As a small business owner, you’re responsible for keeping track of finances. Not only does maintaining accurate records save a lot of hassle and stress at tax-time, but it also allows you to look back on your progress as your business grows. Bookkeeping can be intimidating at first glance, but it doesn’t have to be complicated. Here are the steps to starting on the right foot as you launch your indexing business.

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Find a system

There are many accounting applications to choose from, ranging from very simple to very sophisticated. Unless you enjoy learning the ins and outs of new applications, and using features such as charts and projections, at this stage in your career you’re probably safe in choosing a basic program. Several popular applications even include a free basic version which may suit your needs just fine (for example, ZipBooks (zipbooks.com) and Wave Financial (waveapps.com/accounting) both offer free versions). If you’re having difficulty deciding on a program, you may want to explore user reviews online before you settle on one.

Another approach is to set up spreadsheets to keep track of some or all of the information you need to collect. Depending on your comfort level with Excel, this could be a very good way to begin until you start getting more clients and incurring more expenses.

Excel has many advanced features that can make updating financial information incredibly efficient, but even in its most basic form it provides a convenient way to track dates and numbers and perform calculations.

Start early and do it regularly

Regardless of which bookkeeping tool you choose, the sooner you establish a system and the more regularly you update your financial records, the less stressful bookkeeping will be (in fact, you may even come to enjoy it!).

If you’re still working on finding clients and developing sample indexes, this could be the perfect time to set up a spreadsheet or begin test driving your chosen accounting software. Once you’ve got jobs coming in, decide on when you’ll make updates and stick to that routine. You may want to do this on a job-by-job basis, or on a weekly or monthly basis.

Updating your records after each job means everything is at hand (your invoice, and any notes you made about the job or the client, for example), and you’ll be less likely to have to go flipping through emails and file folders to retrieve the information you need.

You may wonder whether you could just update your business’s financial records when you update your household budget. While this makes sense in terms of establishing a routine, keep in mind that there are advantages to keeping your business finances separate:

You will more easily be able to see your business income and expenses if things are kept separate
If you are ever audited at tax-time, you may be asked to collect and provide financial information specific to your business income—it may be inconvenient to have to disentangle this from your household income.

Try keeping a hard copy

Of course, it’s always a good idea to keep a backup copy of your financial records in the event of a computer crash, and these days there are a number of ways to do this electronically. However, for some people, working with old-fashioned hard copies of records such as invoices can make it easier to stay on top of accounting tasks.

For example, try printing off your invoice as you send it to the client, and keep it in a labelled folder. When you’ve received payment, jot down the date of payment on the invoice and move it to a folder you’ve labelled “Paid Invoices”. Your invoice should include most of the information that will later go into your accounting software or spreadsheet, so you’ve already done 90 percent of the work!

Even if you don’t have the time to make your electronic update, at least you can now easily consult your folders when you do have time.

Find a system

Start early and do it regularly

Try keeping a hard copy

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