Have you started a side hustle to make more money?  Do you dream of turning your side gig into your main source of income?

It doesn’t matter if you write books, print shirts, create artwork, plan events, sell makeup, or fix houses.  If you are creating a product or providing a service in order to earn income or make a profit, you have a business.  In order to grow, you need to be in the know about your finances.  You might hear the term “bookkeeping” and think that it applies to “bigger” small businesses.  The truth is that every business, no matter what size, needs to perform proper bookkeeping in order to track income and expenses and prepare taxes accurately.   

If you are a solopreneur or run a micro business, you do everything.  You don’t have the luxury of employees, other than perhaps a spouse or friend who helps out because they want you to succeed.  With all of the things you have to do to run your business, keeping good books might be the last thing on your mind. 

The good news is that most micro enterprises and solopreneurs have a fairly simple business model.  That means tracking the finances should be straightforward as well.  Read on for 3 tips to set up and maintain a solid bookkeeping system. 

1.  Separate business finances from personal finances.
Get different bank accounts for your business.  You can open business bank accounts as a sole proprietor.  A banker will tell you what documentation you need to provide.  If you like your current bank, start there.  If not, shop around for a different bank.  Most accounts will have monthly fees unless you meet a minimum balance or some type of automatic transfer requirement.  Some people prefer a local bank.  Others like a big national bank.  It doesn’t matter what bank you use as long as you have separate business accounts.  Start with at least a checking account, and then you can open a savings account when you need one.

If you use a credit card for business, use a separate card.  You may not qualify for a business credit card.  If you have a personal card that you can use exclusively for business purposes, that will work. You just need to show that there is a separation between personal and business finances.

2.  Set up and use accounting software to track your income and expenses.
You don’t have to pay a huge amount each month for complicated accounting software.  There is software to fit every business and budget.  There is even free accounting software that will link to your bank to automatically import your transactions.

Once you import transactions into your software, you will need to categorize them properly.  Most software does a good job of this automatically, but you still need to review it to make sure it’s correct and change anything categorized incorrectly. 

In addition to tracking income and expenses in order to know how well your business is doing, it is also important for tax purposes.  You can also attach receipts to expense transactions in your software.  This is important for tax purposes and proving businesses expenses.  If you use accounting software, tax time will be less stressful because all of the information is already organized in one place. 

If you input accurate data into your accounting software, it will be the financial “brain” of your business.  After your transactions are categorized, you can generate reports that tell you how your business is performing.  You will receive insight into where you can cut excess spending or see an area where you can invest more.  You can generate these reports at the click of a button, and they will give you guidance to make informed decisions so that you can grow your business.   

3.  Reconcile your accounts regularly with your accounting software.

This might sound a lot more technical and difficult than it actually is.  It just means you need to compare your bank statement with your accounting software to make sure that they say the same thing.  Sometimes transactions get imported into the software twice or missed completely.  When you reconcile each month you will find any erroneous transactions and be able to fix them.  Your actual bank balance should always agree with the bank balance shown in your accounting software. 

Most software has a reconciliation tool to make this process relatively painless.  It is important to keep up with it on a regular basis to find and fix issues quickly. 

By following these three steps, you will be able to set up good bookkeeping and get a handle on your business finances.  If you have questions or don’t have the time to set up a bookkeeping system, call a professional bookkeeper.  They can provide one time set up and training in order for you to maintain the system yourself.  Or a bookkeeper can provide ongoing services on a monthly or quarterly basis.  Don’t hesitate to reach out for help.  Your business depends on you having a good bookkeeping system.