When you took that leap of faith to start your own business the last thing you probably thought about was bookkeeping. It definitely isn’t the glorifying part of creating something successful, but it could possibly be the difference between success and failure. This is the most important piece of running your business.

You have so many things on your plate when you are trying to make your business a success. Things like cash flow, what is your business worth, should I bring on another employee or is this business profitable. The answers to these questions can be answered by having a good set of books. Bookkeeping can be thought of as the medical records of your business. It is going to let you know if you are healthy or need to work on pieces of the business that are unhealthy.

Business owners use bookkeeping to record the transactions of the business. When you start this important practice from the first day you open your doors it gives you an incredibly powerful roadmap going forward. You are able to look back at the previous year’s books and better predict what the future holds. If you had strong sales in last year’s summer months you can plan accordingly by increasing inventory or hiring an extra hand. Also, if you have tight months during the winter you are able to plan ahead by putting back extra money during the busy months. Good books are going to help you make these important decisions. 

Another important part of running a business is having enough money to grow. If you are not able to secure enough money through the business to grow you are most likely going to turn to a bank for a loan. The first thing the bank is going to want to see is some financial statements. You are going to make these financial statements from your excellent bookkeeping. Plus, you are going to be able to add charts and other powerful information that shows your prior year’s growth along with projections. On the other hand, if you don’t have good books it might show the banker you don’t really know the health of your business. 

Most business owners start a business that is already in an established industry. When you open your used car lot you are not the first to do so, and the same is true for a public accounting firm, clothes shop and jewelry store. Having good books will allow you to benchmark your business against those in your industry. It will tell you if you are spending too much on inventory, you’re not doing enough advertising or a number of other financially related questions. This is very powerful when you are a small business and you want to tap into the knowledge of very successful companies that have paved the way in your industry.

At the end of each year all business owners have to submit a tax return to the Internal Revenue Service. This becomes a very difficult task when you have procrastinated keeping a good set of books. Figuring out your box full of receipts and turning that into a tax return will have you thinking about going back to work for someone else. When you have been keeping your books regularly throughout the year filling out the tax return becomes a welcome event because you are in control of your finances. 

Lots of business owners use a system like Quickbooks and Xero to keep track of their transactions. You can also find other software systems to help. You don’t want bookkeeping to take away from the time you need to spend growing your business. I recommend getting in touch with a Certified Public Accountant who can help you set up a system that is going to be easy to use and help you get the most out of your books. Successful locally owned businesses are the backbone of a community and we all want to see you succeed. 

You had an idea for a business, you pushed forward and now you’re 100% committed. Running your own business can be very different than what you had imagined. It quickly turns into several different jobs. Once you own a business you become responsible for everything. Hopefully, it becomes successful and you are going to need to hire an employee to help you expand. When this happens that means you are going to have to figure out to how to do payroll. It isn’t as easy as just writing a check, because a lot is involved with payroll. These are the nuts and bolts of payroll.

All of us (except maybe a first-time worker) realize that we don’t get all of our wages earned. Monies are withheld for State income taxes, Federal income taxes, Social Security and Medicare. You might also have a retirement plan or employee benefits taken out of a paycheck. Deducting these from the paycheck is your responsibility, the employer. If you haven’t started keeping detailed records yet, now when be a great time to start.

First, you want to have your employee(s) fill out a Form W-4. Situations are always changing, and it is a good idea to have this formed filled out each year. This form is a roadmap that will help you figure out the amounts that will need to withhold from each paycheck. Form W-4 is involved and is going to finish with the amount needed to be withheld from every paycheck. It is very important to take the time to fill this out correctly. An incorrect Form W-4 could result in having a surprise tax burden at the end of the year, or that you were giving away too much money during the year that could have been used towards expenses or savings.

Next, you will need to figure out how much New Mexico withholding will need to be taken out of each paycheck. You are going to use the number of allowances you claimed on the Form W-4 and then use a table the State provides to figure out how much additional monies need to be withheld. You are going to need to decide how often your employee is going to receive a paycheck. Is this going to be weekly, bi-weekly or monthly. Also, are you paying your employee an hourly wage or salary. If you hired an employee expecting them to work 40 hours a week, but they only worked 30 hours the amounts are going to change. As an employer you don’t want to be spending extra monies that could be used to grow your business because you don’t have a strong understanding of how your payroll works.

Third, you are going to have FICA payroll taxes that need to be withheld from every paycheck. The amount for these taxes is an easy calculation, 15.3%. The employee is responsible for half of this amount and the employer the other. However, it is the employer’s job to withhold the total amount from the paycheck. FICA taxes are a combination of Social Security tax of 12.4% and Medicare tax of 2.9%. It depends on the size of your payroll on how often you make deposits for this withholding. The Gallup Journey Magazine makes one deposit each month, but my employer makes a deposit each week. It is going to be a monthly deposit, a semi-weekly deposit or done quarterly.

Now that you have figured out how much to withhold from your employee(s) paycheck the fun part begins. It is your responsibility to report this information to the proper State and Federal agencies. Most likely (depending on the size and timing of payroll) this is going to be done monthly. You will also need to do a quarterly return with the Internal Revenue Service. Not only are you reporting these amounts, but you are giving these agencies the monies that are to be withheld. Not staying current with your payroll taxes is a situation no business wants to put themselves into. Good record keeping is going to help you become a profitable business.

Payroll can be very overwhelming. When you started your business, you didn’t imagine the amount of time you would spend on the “other stuff.” You can find lots of payroll calculators to help you with the process if you want to become really good at this. However, I imagine you think your time is more valuable growing relationships and your business then calculating withholding taxes and filing reports. Certified Public Accountants make record keeping and payroll their business. Services like payroll can be very affordable and providers make sure you are doing everything correctly. If figuring out payroll is not where you want to spend your valuable time, then get in touch with a payroll specialist. Visit my site online and get in touch.