# 4 Essential Bookkeeping Tips for Small Businesses | Capterra > If you're a business owner, the last thing you have time for is becoming a professional accountant. Use these tips to get a handle on the small-business bookkeeping essentials. Source: https://www.capterra.com/resources/essential-bookkeeping-tips-small-business --- # 4 Essential Bookkeeping Tips for Small Businesses By Andrew Conrad Andrew Conrad Andrew Conrad is a senior content writer at Capterra, covering business intelligence, retail, and construction, among other markets. As a seven-time award wi... [See bio & all articles](https://www.capterra.com/resources/author/aconrad/) Published December 11, 2019 6 min read Table of Contents - [4 bookkeeping essentials for small-business leaders](#4-bookkeeping-essentials-for-small-business-leaders) - [Stay on top of your small-business bookkeeping](#stay-on-top-of-your-small-business-bookkeeping) ## Your money is the lifeblood of your business. Follow these essential small-business bookkeeping tips to keep a pulse. Whether you're running a boutique shop in a small town or a futuristic drone rental service, you started your small business because you enjoy your niche or saw an opportunity—not because you wanted an excuse to stay up late crunching numbers and balancing accounting ledgers. Still, unless you're successful enough to employ your own full-time CPA, you need to know at least the basics of small-business bookkeeping and how to use [essential accounting tools](https://www.capterra.com/accounting-software/) to keep yourself afloat. (And even if you do have a CPA, you should still know enough to [make sure they're not trying to defraud you](https://www.capterra.com/resources/business-fraud-prevention-red-flags/)). Don't worry, we have you covered. Follow this guide, and you'll be able to stay on top of bookkeeping at your small business, no matter your niche. ## 4 bookkeeping essentials for small-business leaders Luckily, keeping your books straight doesn't take a master's degree. It simply takes a little time, the right tools, and attention to detail. Follow these four steps to get your bookkeeping done quickly and accurately so you know where your money is, and you're ready to file with confidence [when tax time rolls around](https://www.capterra.com/resources/how-to-file-taxes-for-a-small-business/). ### Invest in accounting software, and use it Before you deposit your first business check or record your first expense, do yourself a big favor and [set up accounting software for your business](https://www.capterra.com/accounting-software/) (you can even find some [free options](https://www.capterra.com/resources/top-free-accounting-software/)). It'll save you countless hours of work and rework in the long run, and all of those hours translate into time you should be investing in growing your business. Accounting software can track invoices, pay your bills, and reconcile your accounts (among other things). If you've ever done any (or all) of those things manually, you know how long it can take. In addition to saving you lots of time, accounting software is also vital to keeping accurate numbers in one place so you can easily and [correctly file your taxes](https://www.capterra.com/resources/why-do-businesses-get-audited/) at the end of the year. * * * Not sure where to start sorting through the countless software options out there? Check out our accounting software buyers guide for help. [](https://www.capterra.com/accounting-software/#buyers-guide) * * * ### Keep your business and personal expenses separate Once you have your accounting software set up, make sure you're only feeding it relevant information by getting a separate credit/debit card for your business and using it strictly for business expenses. [The consensus among CPAs](https://www.capterra.com/resources/how-to-file-taxes-for-a-small-business/) is that neglecting to separate personal and business spending is one of the biggest and most common mistakes that small-business owners make. Why is this so costly? In a best-case scenario, you'll have to spend countless hours at tax time meticulously sifting through pages of bank transactions and trying to remember which expenses were business-related and which were personal. In a worst-case scenario, you'll end up committing tax fraud by claiming a personal expense as a business one and [get a call from the IRS](https://www.capterra.com/resources/why-do-businesses-get-audited/). On the flip side, you might miss out on valuable tax credits and deductions because you forgot to claim something that you bought for your business on your own dime. There's no need (or excuse) for this mistake, either. [Get a business credit card](https://thepointsguy.com/guide/top-business-credit-cards/), use it for your business-related spending, and keep it separate from your personal cards at all times. ### Balance the books at the end of every month With your accounting software in place and business transactions feeding it data, you're ready to check to see if there are any money leaks. Luckily, accounting software makes account reconciliation a snap. Your balance sheet (which essentially shows all of your business' assets and all of its liabilities) is the ultimate source of truth that informs all of your business finances. Once you've made sure that all of your business income is reflected in your accounting system (if you're small enough you can do this manually, but it's easier to use the invoicing system that comes standard with all accounting software) along with all of your expenses (connect a business bank account and [integrate your payroll](https://www.capterra.com/resources/best-practices-payroll-processing/) to make this easier), balancing your books will be as easy as running a reconciliation report. Here's a quick, two-minute [guide from QuickBooks](https://quickbooks.intuit.com/tutorials/lessons/reconcile-accounts/) on how to reconcile your accounts: _How to Reconcile Your Accounts in QuickBooks (_[_Source_](https://youtu.be/ZQyTWxPhdug)_)_ Your accounting software should also remind you to do this every month, so you can focus on running your business and making money for your software to tell you about. ### Track your essential reports Great news: If you've made it this far, this part will be easy and rewarding. You have your accounting software set up, you're keeping your business expenses separate from personal expenses, and you're making sure everything is balanced at the end of every month. Now you can use your software to produce bookkeeping reports that will let you know how your business is doing. For starters, here are the [three essentials](https://www.capterra.com/resources/awesome-free-reporting-software-packages/), and what you can learn from them: - **Balance sheet.** As we saw in the section above, this report shows you everything you have against everything you owe. Here's an [example if you need one.](https://www.freshbooks.com/hub/accounting/balance-sheet) - **Income statement.** Also known as the profit and loss statement, this report shows you all of the assets that came into (revenue) and went out of your business (expenses) during a period of time (a month, quarter, or a year). - **Cash flow statement.** Similar to the income statement, the cash flow statement shows the money coming in and going out of your business over a period of time. The difference is that the cash flow statement is just money, while the income statement includes non-cash accounting, such as real estate value and equipment depreciation. _An example of a balance sheet (_[_Source_](https://www.freshbooks.com/hub/accounting/balance-sheet)_)_ Use these three reports to keep track of your business' financial health and make decisions on when to throttle spending versus when to invest in growth. ## Stay on top of your small-business bookkeeping Congratulations! You have the basics of small-business bookkeeping down. But as your business grows, it's going to get more complicated and you'll eventually need help. One of the smartest things you can do as a business owner is to admit when you're in over your head and call in help from a professional. #### For more small-business accounting tips, follow our blog. Here are a few relevant articles to start with: - [What Is QuickBooks Live, and Is It a Smart Choice for Your Business?](https://www.capterra.com/resources/what-is-quickbooks-live/) - [4 Free and Open Source Reporting Software Packages to Diagnose Your Business Health on a Budget](https://www.capterra.com/resources/awesome-free-reporting-software-packages/) - [This Free Small-Business Budget Template Will Take Your Bookkeeping to the Next Level](https://www.capterra.com/resources/free-small-business-budget-template/) * * * Looking for Accounting software?Check out Capterra's list of the [best Accounting software](https://www.capterra.com/accounting-software/) solutions. ### Was this article helpful? * * * ## About the Author [### Andrew Conrad](https://www.capterra.com/resources/author/aconrad/) Andrew Conrad is a senior content writer at Capterra, covering business intelligence, retail, and construction, among other markets. As a seven-time award winner in the Maryland, Delaware, D.C. and Suburban Newspapers of America editorial contests, Andrew’s work has been featured in the Baltimore Sun and PSFK. 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