5 Bookkeeping Tips for Side Businesses
An estimated 40 million adults work for themselves: some full-time as entrepreneurs and solopreneurs, some part-time as gig workers seeking supplemental income. Those whose solo business is a side hustle have to balance their part-time venture with their regular work, and thus, they place high value on time management. Accounting and bookkeeping, while vital, are often second thoughts: tasks to be completed when there is extra time—which there hardly ever is for those balancing multiple jobs and clients. Gig workers and solopreneurs know their time is best spent when they are serving clients or generating new leads—not crunching numbers at a computer, which is why bookkeeping is often neglected or left to the last minute.
Disorganization hurts a business of any size. It can result in errors, unpaid invoices, missed tax deadlines, and lost income opportunities. A good bookkeeping system, even for small side businesses, is important to keep revenue and bills updated and accounted for. If side income is enticing—but bookkeeping is not your thing—some tips from which even the smallest of side businesses can benefit and improve:
1. Get a system
When administrative tasks take on low priority or are left to the last minute, they tend to get done as hastily and with little attention to method and details. Having a designated system for sending invoices and reminders, recording payments, paying bills, and preparing taxes makes the entire bookkeeping process smoother and less prone to error. A good system includes good record keeping, as well. Automated online financial services can provide a streamlined system for you so that you don’t have to start from scratch.
2. Set aside time
Time efficiency is essential to a solopreneur, particularly if he or she is balancing side work with full time employment elsewhere. When most of your time is needed to complete projects and solicit new clients, there is little left over for account management. Setting aside a designated day of the week or a specific block of hours each week that can be exclusively dedicated to bookkeeping will keep you disciplined and on-task. Having that bookkeeping time window blocked out in advance will prevent you from overcommitting your schedule and omitting important accounting updates.
3. Reduce the paperwork
A lot of side and solo businesses are run from the home, where space for office work may be limited. Cut down on storage space and improve record-keeping by utilizing a cloud-based system that allows you to scan and upload images of receipts, invoices, and any other important financial documents so that you don’t need filing cabinets and folders. Storing scanned receipts makes tax preparation simpler by keeping all your deductible business expenses organized and documented for later reference.
4. Open a separate bank account
Even if your business is small, it may be beneficial to keep the revenue in an account separate from your personal account. Mixing business money with personal funds makes account reconciling more challenging because each business transaction has to be isolated one by one from bank statements in order to be updated into the company’s accounting record. Having a separate business checking account and dedicated bank statements saves hours of time later organizing and reconciling and enables you to track business expenses for exact itemizing. Bill paying and tax filing is much easier when the business money is held in a separate account and you can see exactly how much cash you have on hand for business expenses each month. If you often forget to set aside money for taxes, it may also be helpful to open a separate savings account with automatic transfers so that you don't have to worry about falling short.
5. Use digital tools
A myriad of online accounting tools is available for businesses of all sizes. Online cloud-based software gives business owners real-time access to the books without requiring expensive software and equipment that has to be maintained and updated. Affordable business management can provide online invoicing and bookkeeping assistance; using programs that integrate with each other reduces data entry and calculation errors. Research the many accounting tools for freelancers and small businesses that can upload and store receipts, generate reports, issue payments, and print and mail checks for you. Software that offers mobile features may be especially important for those who work from various locations.
For freelancers and gig workers who are limited in both time and budget, the most important features for online tools are user friendliness and affordability. Checkeeper, an online check printing and mailing service that integrates with many popular business accounting programs, offers both.