What type of bookkeeping is necessary to maintain a business,
like many other questions, depends on the type of business. A large
corporation will probably need a team of CPA’s on staff, and even a
lawyer who specializes in tax matters. A small business though, an LLC,
S Corp, partnership or sole proprietorship has simpler needs.

The small businessman may do much of the bookkeeping himself, or
have it done by his administrative assistant using one of the many
popular bookkeeping software programs out today, or even templates
available for spreadsheets like Excel, Quattro and Lotus. The small
businessman really just needs to keep track of income that comes into
the business, money that goes out of the business, what it goes out
for.

Saving receipts and making notes in the checkbook ledger are two of
the most important parts of small business bookkeeping. You can only
claim a legitimate business expense, and therefore claim a deduction if
you have a receipt to prove it if challenged during an audit. Save all
receipts, no matter how small, because they all add up.

One of the most important reasons to have good, accurate bookkeeping
is tax time. Many business pay taxes on a quarterly basis, Some pay
annually. Either way, accurate records are demanded by the IRS, and are
the only way to limit your tax liability legally and to withstand an
audit if it ever happens.

While most small business owners prefer to have someone else handle
their taxes, and many prefer to delegate bookkeeping chores to an
employee, is essential that the business owner understand the process
of bookkeeping and the tax system. If your education didn’t include
bookkeeping and taxes, check the local community college and see what
they offer, and get an education in order to help yourself.

Every small business owner needs to have a basic understanding of taxes, both state and federal, as well as any local taxes that may apply.

While everyone pays taxes, a small business owner has as a primary goal paying as few taxes as possible. For this reason small business owners need to save receipts for every purchase made. Keep track of all expenses, including the mileage you put on your car for business related trips. It all adds up, and with enough deductions, you reduce your tax bill.

Also, always pay business bills by check or by credit card in order to have a written record of the expenditure. If possible, avoid keeping petty cash in the office. If you must use petty cash, always get a receipt.

Some businesses do some business with others through bartering. This can be great for cash flow, but treat the barter like cash for tax purposes. Trade invoices with the other business and you’ll both come out ahead at tax time.

When it comes close to tax time or when you are planning the new year’s goals, it is always a good idea to look at possible capital expenses. Would you be better off buying a new vehicle, new piece of heavy equipment, or a new computer before the end of the year or after the end of the year? Or would you be better off leasing. Taxes bring up permanent questions such as these, with only temporary answers because the answers change from year to year as the tax code changes.

For this reason having a good tax preparer available as a hired gun is always a good idea. This can be a CPA, or a good non-certified accountant whom you trust. Or a lawyer who specializes in taxes. Generally if you have a very small business a non certified accountant is fine, and the larger your business gets, the more likely you are to need a CPA.