Bookkeeping Considerations for Business Partnerships

Sep 29, 2022
Bookkeeping Considerations for Business Partnerships

Starting a small business is not a small undertaking. The number of small businesses and small business partnerships continue to increase each year as more people choose the flexibility of working for themselves. No matter what type of business you’re in, good financial management is vital to long-term success. If the business is owned by a sole proprietor, all the initial bookkeeping responsibilities fall squarely on the owner—at least until additional hires or outsourced agreements are attained. If the business is a partnership between two owners, many aspects of running the business are shared so that one person does not take on all the work or all the risk. While a partnership has many advantages—including easier workload management, doubling of talents and skills, and reduced upfront investment for each person—it also requires sharing decision-making power, which can lead to financial complications if clear agreements regarding financial management are not well-established early on.

Partnerships need thorough bookkeeping methods

All businesses need accurate books, but businesses that are partnerships may have special bookkeeping challenges that require more attention than sole proprietorships. Partnership agreements that address financial and legal liability limits, division of labor between partners, salary withdrawal options, profit distributions, and upfront investment requirements must consider all these factors when establishing a bookkeeping and financial management system that is accurate and legally compliant.

Professional services can save time and eliminate errors

Inaccurate books will lead to headaches and disputes later, as well as potential tax complications. Hiring a professional may be necessary to get finances organized and keep the business legally compliant. For small business partnerships that don’t have a lot of financial transactions or are working on a limited budget, some in-house bookkeeping may be an option. But caution is still needed so that costly problems and disputes do not arise. Online bookkeeping services can help streamline the bookkeeping, improve cash flow, and prevent disagreements later. Some options to consider when establishing and delegating bookkeeping in a partnership:

· Establishing a clear system for recording transactions that both people can understand and follow will reduce mistakes and disputes.

· Having only one person handle the day-to-day financial transactions when possible prevents redundancy and neglect.

· If bookkeeping responsibilities are shared, clear delineation of which bookkeeping tasks (paying bills, sending invoices, reconciling accounts, etc.) will be handled by which person creates efficiency and reduces chances for oversight.

· Accounting software that takes care of the most routine bookkeeping tasks for you and tracks every transaction helps reduce miscommunications about revenue, expenses, dates, and amounts.

· Having both partners review the books and accounts regularly helps catch errors, keeps both parties informed of the business’s financial health, and prevents potential misuse of funds. Online accounting tools allow authorized users instant, up-to-date access to records from anywhere you happen to be working.

Bookkeeping should be consistent

While a lot of aspects of a business benefit from creativity and unorthodox approaches to situations, bookkeeping can suffer when everyone is doing things in his or her own, unique way. The best bookkeeping is systematized and standardized and adherent to a schedule so that tasks get done the same way each time, on time, regardless of who does them. Online financial software products for small businesses provide a systematized and consistent way of tracking expenses and recording income that can be accessed from anywhere at any time. Online check printing can be a helpful add-on to accounting services for those times the business needs to issue payment by check. Business checks printed through Checkeeper require very little time to create and can be customized with your chosen partnership name and logo. They can also be mailed for you to save additional time and eliminate the expense of check stock, envelopes, stamps, and printer supplies.

If the business grows to the point that bookkeeping becomes too time-consuming or complex, you may need to hire a bookkeeper; the right online accounting software will allow you to share your account records with your professional bookkeeper so that there is no disruption to your business’s financial management. Checkeeper is compatible with many accounting products on the market and is a go-to tool for professional bookkeepers who can help manage your business’s transactions from afar.