Small Business Accounting Do’s and Don’ts by Anera Shell, CPA

Anera Shell is a CPA who’s worked with several small businesses and real estate businesses, mostly undoing the damage their owners have already done to “the books”. If you follow her simple guidelines, below, you’ll save yourself a lot of money—and pain.

Small Business Accounting Do’s and Don’ts by Anera Shell, CPA

Small business owners have a lot on their plate.

Some of it they are really good at: Selling their product, promoting their brand, working with customers, managing contractors.

But something they tend to be really bad at: keeping track of their income and expenses. And that’s important for a lot of reasons. With poor bookkeeping, you can’t answer a lot of important questions, like: Is your business making money? Are you taking all tax deductible expenses into account? Would your books stand up to an IRS audit?

Real estate entrepreneurs like to save money. Because of that they tend to try to do everything themselves. And my first DON’T is, don’t try to “save money” by doing your books yourself! You will make enough money to pay for a bookkeeper if you spend the time working on your business instead of on your books. Do what you are good at, not what you aren’t.

My first DO: WHILE YOUR COMPANY IS STILL SMALL, get someone who really knows what they are doing to setup your accounting and filing system.

And that means get an experienced accountant, one who understands your business. An investment of a few hundred dollars upfront will save you at least that much in time, in tax savings, in tax preparation savings, and in better understanding whether or not your business is making money.

This is ESPECIALLY important if you have more than one entity (LLC’s, partnerships, whatever). Once you get your entities’ accounting tangled together, you will never be able to get them apart. You can lend and borrow among entities but only if you do it properly, and account for it properly. Start mixing everything together and your asset protection strategy is pretty much out the window. And you are going to be spending a fortune getting someone to fix everything.

Don’t wait until you get bigger, because the bigger you get, the busier you will be, and the more complicated everything will be. If you get it set up properly the system can grow with you. Don’t wait until you get overwhelmed with work, then try to find time to do your books.

My next don’t: Don’t just ask a friend, or get a book, or God forbid, throw everything into a shoebox. If you are running a professional business then you need to setup a professional accounting system.

So, how do you do that: You actually have a lot of choices. The most popular one is Quickbooks, but that doesn’t mean that is your only choice. Quickbooks, in fact, is really only a good choice in a few situations: if you are going to send out invoices, or if whoever is doing your taxes can import your file and charge you less to do your taxes. (Warning-if your QB file is a mess because you didn’t get it setup properly, then it’s going to end up costing you MORE).  If you don’t have to send invoices, Quicken is a much easier option. It works just like keeping a checkbook, but lets you run the necessary reports. You can even just keep everything on a spreadsheet, but unless you are really good with spreadsheets that option might end up causing you more work.

My next do: Set up an easy to use filing system, so all your paperwork doesn’t pile up or get lost. Almost everyone hates to file (me included). The trick is to set up a system that is so simple that it takes care of itself.