Bookkeeping Resolutions for 2021

I was recently reading about New Years Resolutions. 94% of the respondents to a survey stated that people should try to keep their resolutions for at least one month. That number keeps going down, the further and further you move from the 1st of January. Resolutions, we know, are all about creating and keeping habits in place. So many times, as a bookkeeper, I hear my client's financial resolutions each December and January.

Sometimes, the goals are awesome. As their bookkeeper, I am excited about what this change will bring! Other times, however, the goal seems too lofty or expansive. Like the business owner has been tracking their expenses with a shoebox of receipts, but now will be handling them with the finesse of a CFO at a Fortune 500 company.

This got me thinking about the resolutions I feel most small business owners should make in relation to their books. I came up with 5 - and none of them require becoming a Certified Public Accountant.

Over the next five weeks, I am going to share them with a couple of tips on how to keep it.

#1: Create a line in the sand: No, you are not going to war, but you are putting a stop to co-mingling funds.

Think about it: How many times last year did you grab your business debit card to pay for a personal expense? Or what expenses did you put on a personal credit card in order to take advantage of a rewards program? This type of co-mingling of funds happens all the time in small businesses. While it seems like it is not a big deal, it creates some challenges and is considered a bad business practice.

So, first on your agenda, if you haven't already, is to call your financial institution and ask to speak with someone to set up a business checking account. Once the account is set up, start using it to pay for all your expenses and collecting all your revenue.

Already have a business account? Great. Use it. And use it exclusively for business income and expenses.

A question that bookkeepers are asked frequently is: Would "X" be considered a business expense. You may be asking about the ability to deduct it for taxes as a business expense. For that, you want to consult your CPA or tax consultant. These rules change constantly.

A general rule of thumb: if you wouldn't have this expense without your business, then it is probably a business expense. This does not mean it is deductible, simply that it is an expense accrued by operating your business. *

What do you do if all your money is in your business account and you need it to pay personal expenses? Move it to your personal account.

This can be a simple process, especially if you are a sole proprietor or a single-member limited liability company(LLC). Simply write yourself a check and deposit the funds in your personal account. Or, if your bank allows it, set up an online transfer.

If you are organized with partners, or have payroll, or have a corporate structure, you want to consult with your CPA about the best way to move funds. He/She may recommend setting up distribution on a regular basis or an increase to salary/payroll.

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* Task It 2 ME LLC is not a tax prep or CPA firm. We can not give tax advice, nor should anything on our website be construed as legal and/or tax advice