Bookkeeping, Finance, and Tax for Your Business

7 Things You Should Know About Bookkeeping, Finance, and Tax for Your Business

Erik Entrepreneurship, Thoughts of a Mastermind Leave a Comment


You’ve set up your business, you’ve created an amazing product, your sales and marketing team is crushing it, and you’ve protected yourself legally through a corporate structure, terms, policies, and agreements.

How is your business doing? Are you making money or losing money? What’s your weekly, monthly, yearly cash flow, revenues, and expenses? How much of the business do you own

After setting up your business, creating an amazing product, getting the sales funnel and marketing going, and making sure the proper legal protections are in place, then it’s critical to get your books in order.

In this post, I will be sharing with you 7 things you should know about bookkeeping, finance, and tax for your business. This will not be a guide on how to do these tasks, but rather, a high level overview of financial things to know with regards to finance and your business.

Disclaimer: I’m not a CPA or tax professional. Please do your own research for the laws of your state and country for your business. 

7 Things You Should Know About Bookkeeping, Finance, and Tax for Your Business

For success in business, you don’t necessarily have to also be a finance expert or accountant. That being said, it helps quite a bit if you understand the in’s and out’s of your financial statements, and understand the ways you can bring in more profits.

Here are 7 things you should now about bookkeeping, finance, and tax for your business.

Keep the Books Straight!

Just like personal finance, tracking your income and expense over time is the most important thing for financial success in your business.

It goes back to my favorite quote:

“What gets measured, gets managed.” – Peter Drucker

A purchase for those pens? Make sure to note it.

Your investment in a building? Don’t forget that!

Get in the mindset of keeping your books straight and tracking everything in your business.

With this mindset, we can move on to some of the more technical pieces of finance.

Financing Your Business

In order to make money, you will have to spend money.

After opening your business bank account, will you be filling it with your own cash (through a capital contribution)? Will you be getting a loan? Will this loan come from the bank or from you and your partners?

These are questions that you need to think about up front. Many times, the initial capital contribution (investment) is from the partners.

When your business starts growing, and you want to expand, then there are many other possible sources of capital and investment (venture capital, big banks, etc.)

The Income Statement

The income statement shows a business’s income and expenses over a certain period of time.

What are your sales? Which product is responsible for these sales?

On the flip side, what are your expenses for the period? Which category is your highest spending category? Could you reduce this expense category?

Finally, with the income statement, you can answer questions like, “what is your profit margin?” and “how much does it cost to produce your product or service?”.

This is one of the couple important financial reports for your business.

The Balance Sheet

Another important financial report for your business is the balance sheet.

The balance sheet is a snapshot in time of your business’s finances; it is a snapshot of your business’s assets, liabilities, and equity.

How much cash does your organization hold? Inventory? What about accounts receivable? These are your assets.

How much does your company owe? Did you take out a loan or have credit cards? These are your liabilities.

Cash Flow

How much cash are you bringing in on a daily, weekly, and monthly basis?

Will this incoming cash be sufficient to cover your expenses?

Many businesses set up accounts payable and accounts receivable programs where payments are not sent and received when the services or products are bought, but rather, due 30 days later.

If you perform your service or sell your product today, can you keep the doors open for the next 30 days with your previous sales and their payments?

Obviously, you can do business however you want, but even if you demand payment upon receipt, there will still be a 1-2 day period where you won’t have that cash in the bank.

If you understand your cash flow, you will be able to make much better decisions to make sure you don’t run low in the bank.

How the Income Statement, Balance Sheet, and Cash Flow Work Together

There are full books on this topic, so I won’t look to attempt this here. Instead, I’ll share with you a great video on the subject of finance from William Ackman:

Tax Structures

When setting up your business, you first figure out how you legally want to structure your business: LLC, partnership, LLP, etc.

The next decision you have to make is how to structure your business from a tax perspective.

I’m not an accountant, and I don’t know the intricacies of these different structures (S-Corp, C-Corp, LLC, etc.), so I won’t be talking about them in this post.

At the end of the day though, you have to tell the IRS which one you want to use. For more reading see this IRS article on business structures.

Estimated Taxes and Other Taxes

Unlike your day job paycheck, business owners pay their taxes on a less frequent basis.

Income tax for businesses are paid every 3 months. This tax is called estimated tax, and is based on an estimate of your net income over the quarter.

Businesses have more moving parts with their income and expense and this estimated tax is used so that year end tax returns (or payments) are easier to manage.

In addition to income tax, you have sales tax you need to pay. In Minnesota, this sales tax is due in the following month or quarter (depending on how much sales tax and revenue your business is accruing).

If you are making a profit on your sales, and are making money, you will need to pay tax. If you have 0 income, then don’t worry. (something I wish I knew 8 months ago as you’ll read next section)

There are a few other taxes, but again, I don’t really want to get in the weeds, I just want to make you aware of these things. See this IRS article on business taxes for more information.

Focus on Making Money First, and Make the Books Spotless Second

After setting up your business, creating an amazing product, getting the sales funnel and marketing going, and making sure the proper legal protections are in place, then it’s critical to get your books in order.

One thing to note, if you aren’t making money, you won’t have taxes to pay.

I made that mistake with my business – and spent over $1,000 on an accountant I didn’t need. That $1,000 could have been used in a much better spot.

With that said, it is very critical to have your books spotless and up to date. Many states suggest, as best practice, LLC’s and businesses have their books up to date.

I do bookkeeping once a week for my business, look at bank balances and cash flow every few days, and review the complete financials once a month to identify any weaknesses in spending.

Your Task

Bookkeeping, Finance, and Tax for Your BusinessWith every post in this Wantrepreneur to Entrepreneur series, I will be providing you with a task for you to think about after finishing this post up.

If you don’t have a business bank account (which you should after reading the 7 steps to set up your business), make sure to give one. It’s a lot easier to do accounting on one bank account vs. multiple.

Next, go ahead and figure out your income and expenses for your business. Figure out what your assets and liabilities are. How are you doing?

Remember, what gets measured, gets managed!

Once you have your income statement and balance sheet, you can start to optimize your expenses, and identify areas to improve upon.

Finally, if you are making money through your business, make sure to keep the tax man happy and pay your taxes.


Businesses are complicated – there are so many moving parts. Keeping your books straight and understanding how cash, debt, income, and equity all work together is all essential for your business’s success.

You don’t need to be an expert in finance and accounting to get a feel for how much cash you will need to cover next month’s expenses, what is your most profitable product, and figuring out what you could cut back on expense wise to maximize your bottom line.

Financial intelligence is so key for your personal financial success. Make sure to track your income and expense over time, and work to understand how the various financial reports work together to ensure you will be successfully financially.

Readers: are you keeping your books straight? In your opinion, what is the most important finance item for your business?




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