A Small Business Owner’s Bookkeeping Checklist

As I’ve mentioned several times before, I love being self-employed. Although there are some pressures and stresses not found at the typical hourly job, for me, the benefits far outweigh the risks. Being self-employed means that I am in control of my own destiny. I don’t have to depend on anyone else for my livelihood. Plus, the additional freedom that comes with it is hard to beat - especially for a travel addict like me.

But, there’s more to running a successful business than just creating a great product. As any self-employed person knows, you have to wear a multitude of different hats, each requiring its own special set of skills. When you own a small business, you don’t just create the product or service. You’re also the head of product development, lead salesman, the VP of Marketing, the customer service department, the administrative assistant, as well as the CEO. This juggling act can be difficult at times, which is why it’s important to have a system to keep everything straight.

One of the most important jobs of a new business owner is learning to keep accurate books. Not only is it important to make sure you’re getting paid properly (and on time), but you also need to ensure that you’re filing the proper paperwork with government entities at the correct time. If not, you could face hefty fines, cutting into your profits and your only source of income.

To help keep things straight, I developed my own checklist. On it, I have the most important bookkeeping tasks listed by end of the month, quarter, and year. Feel free to use this checklist as a starting point for your own business, or as a double-check to make sure you’re completing all of the necessary tasks. Here it is:

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Tasks for End of Month

These are the most important bookkeeping tasks that I take care of each month. If you've hired an accountant, they should be able to do some of this for you. If you're a do-it-yourselfer like me, you've got to make sure to take care of all of this on your own.

Payroll - If you only have a few employees, payroll shouldn’t be that difficult. Any modern bookkeeping software should be able to handle it. Just make sure your tax tables are updated and the software should make the proper withholdings for you.
Pay Federal PayrollTaxes - Now that you have completed your employee income and payroll tax withholdings, you need to deposit that money with the federal government. To do that, you’ll need to use the Electronic Federal Tax Payment System (EFTPS). Simply open an account at EFTPS.gov to get started. When you’re ready to make a payment, most employers will select “IRS Form 941 - Employer’s Quarterly Federal Tax Return” from the dropdown menu. Then, check your bookkeeping records to see how much you’ve withheld. Learn whether your payroll taxes are due monthly or semi-weekly here. IMPORTANT NOTE: Even though you’ve made a payment, you’ll still have to file the actual Form 941 at the end of each quarter (see below).
Pay State Withholding Taxes - If you’ve withheld taxes owed to your state, you may also need to deposit those. Each state has different systems and rules. Contact your state’s department of revenue to find out how to make payroll deposits and file the proper forms.
Big 3 Financial Statements - These 3 statements are the most important financial statements for any business. Depending on your business structure, you may be required to keep a copy of these to meet record-keeping requirements. Again, any modern bookkeeping program should be able to help you complete them.
Balance Sheet - The balance sheet is a detailed list of your business’s assets, liabilities, and equity. Not only is this an important financial document, it’s also a great way to keep an eye on the health of your business. Even if you aren’t required to keep this document, you should review it each month.
Profit & Loss Statement - In addition to your balance sheet, you should also complete a Profit & Loss Statement (also known as a P&L Statement or Income Statement) each month. This will show you how much money you made (or lost) for the month and may be a record-keeping requirement depending on your business structure.
Cash Flow Statement - The last of the "Big 3 Financial Statements" is your Cash Flow Statement. Along with your balance sheet and P&L, this statement helps determine the financial health of your business. Again, you may be required to keep this document on file depending on your business structure.
Retirement Plan Contributions - As a self-employed business owner, there is nobody who is going to help supplement my retirement. That is why I prefer to make contributions to my retirement plans on a monthly basis. Business owners have a variety of retirement plans to which they can contribute, including SEP IRAs, Simple IRAs, Solo 401(k)s, and more.

Tasks for End of Quarter

In addition to the tasks you’ll have to complete each month, there are also some tasks you’ll need to complete each quarter. Due dates vary based on the task.

Distributions - Depending on how your business is structured, you may wish to take distributions as a supplement to your regular paycheck. We choose to take quarterly distributions, in line with how C-Corporations elect to pay out quarterly dividends. However, you should make sure to speak to an accountant about the size of your distributions and how often you should them.
File Form 941 - Even though you have made your monthly withholding payments, you are still required to file Form 941 - which is your Employer's Quarterly Tax Return. It is super easy to fill out. Essentially, just add the payments you made each quarter and report them on the form. Tax professionals and certain tax software may allow you to file electronically, but it's just as easy to file the paper form.
State Quarterly Tax Return - Depending on your state's rules, you may also have to file a quarterly return with them. Make sure to check with your state to find out their filing requirements.
Pay Federal Unemployment Taxes (FUTA) - If you have employees, you may be required to pay unemployment taxes on a quarterly basis. Employers are required to deposit these taxes on a quarterly basis, but only if the tax due is more than $500. If you're a small employer and never reach the $500 limit, you will make your payment when you file IRS Form 940 at the end of the year. Due dates for FUTA payments are January 31, April 30, July 31, and October 31.
Pay State Unemployment Taxes (SUTA) - Like FUTA taxes, you may be required to pay state unemployment taxes on a monthly or quarterly basis. Check with your state to determine when and how to pay those taxes.
Personal Estimated Taxes - When you work for yourself, nobody pays your estimated quarterly income and FICA taxes for you. Thus, you have to do it yourself. You could be paying yourself a salary, depending on your business structure, so some of those taxes may already be withheld by your business. However, if you’re taking distributions, you’re probably going to need to add some additional tax money to the pot. Your personal quarterly estimated income taxes are due January 15, April 15, June 15, and September 15.

Tasks for End of Year

These are some tasks that you’ll need to complete at least once a year.

Close Your Books - Once you’ve got every piece of financial information accounted for, you should balance and close your books for the year. Once that is done, make sure to print out and save copies of your year-end Big 3 Financial Statements.
Send W-2s and 1099s - If you have paid employees or paid contractors in excess of $600 for the year, you need to send them either a 1099-MISC form or a W-2. You should have these sent out before January 31 each year.
File W-2s and 1099s via Form W-3 - You also need to file the 1099s and W-2 forms with the Social Security Administration before March 31. To register for an account and file your forms, head to SocialSecurity.gov/employer.
File W-2s and 1099s with State - You’ll also need to file the W-2s and 1099s with the state. The due date may be before or after the federal date, so be sure to check with your state so that you’re on time.
File Business Income Taxes - Depending on how your business is structured, you may be required to file a business income tax return. Corporations will file using IRS Form 1120, while S-Corporations should use IRS Form 1120S. Federal tax returns are due on the 15th day of the month, 3 months after the end of the corporation's tax year. If your business year runs on a calendar year, you'll need to file by March 15. Additionally, you may also need to file a state return.
File Personal Income Taxes - Just like all taxpayers, you're required to file a personal income tax return. Personal income taxes are generally due on April 15th.
Deposit Profit Sharing - If your business has a 401(k), you must deposit any profit-sharing from the previous year into employee accounts prior to the business tax filing deadline.

Wrapping Up

When you own a business, you want to focus on what makes you money. However, it is important not to gloss over your bookkeeping requirements. Missing deadlines or underpaying can trigger fines that eat into your profit. We hope this checklist helps you organize these tasks so that you can get back to focusing on your business.

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