How to Keep Your Books Lookin’ Pretty

You might think keeping a haphazard list of the money your company makes on a Google doc does the job. Nice and simple, right? Wrong. Part of being a successful and profitable small business owner is making sure you keep solid records (i.e., books) that look “pretty.” What does this mean? And why is it important to do this? Don’t worry, we’ll get into both in a minute – just keep on reading.

What Do We Mean by Pretty?

Let’s start with what it means to keep “pretty” financials. We can break this idea down into three components, which include:

1. Organization – It’s essential to keep all your business data in one place so you can easily create financial statements as needed. This means using bookkeeping software to store your financial information and activity.

   This data includes:

   1. financial transactions for income and expenses

   2. deposits and withdrawals

   3. business bank account and credit card balances

   4. loan and interest information

   5. invoices and sales receipts

   6. receipts for large purchases

   7. canceled checks

2. Accuracy – Your business data won’t help anyone if it isn’t correct, so it’s important to:

   1) capture the right information to start with, and

   2) properly classify it within your bookkeeping software

   This means that either you or the person you hire to help you

   must know at least basic accounting (like, for example, the differences between assets and liabilities, income and expenses, and so on).

   Keep your business bank accounts and credit cards separate from your personal ones so nothing gets accidentally mixed up. Do not attach personal bank accounts to your business bookkeeping software. In addition, refrain from using any third-party apps (like Venmo or CashApp) that are used for personal purposes.

3. Timeliness – Your information needs to be available when you need it (like if you decide to apply for a loan or obtain more capital). It’s only going to be useful if it’s maintained on a regular basis. So don’t look at it once a year and try to retrace your steps; instead, keep up on your bookkeeping on at least a monthly basis.

Why Do Pretty Books Matter?

So why should you hire a professional or spend the time yourself to ensure that your business records remain organized, accurate, and timely? There are multiple reasons, and they all impact the well-being of your business. 

Most importantly, without pretty data, you can’t create financial statements that are correct. And you need correct financial statements to:

• Generate accurate tax returns and minimize taxes

• Get approved for business loans and lines of credit

• Show the growth of your business year over year

• Reflect your personal income for personal matters like applying for a mortgage or financial aid

Managing your business financials will:

• Support your company’s growth

• Help you attract investors and qualify for funding

• Assist you in making informed business decisions

• Minimize the taxes you owe

You’ll be a savvier business owner who submits accurate tax returns, knows how to reduce operating expenses, and utilizes cash flow management as a standard business practice.

If you don’t maintain pretty books, you’ll have to worry about a higher tax liability (owing more in taxes), potentially paying more in interest and penalties, and possessing a bigger risk of not qualifying for funding (or a mortgage). You won’t be able to see the actual growth of your business (or how much you’ve personally invested into it), qualify for loans or grants, or be able to attract investors. You’ll also be risking your business closing due to incompetence – and we don’t want that for you!

A Final Word From Tuesday Brooks Founder of AJOY  

As you can see, it’s crucial that your company produce regular and accurate financial statements from the very beginning, which can only happen if you keep your books looking pretty (i.e., organized, accurate, and timely). 

But please don’t feel intimidated! If accounting isn’t your strong suit, there are professionals who specialize in bookkeeping for small businesses who can help you.  (Read “Bookkeeping: Should You Outsource It?” for more information.) Let them maintain your financial records so you’re poised and ready the next time an amazing opportunity rolls around.