One of the easiest ways to stay in compliance is to open a separate bank account and credit or debit card for all business transactions. Check with your local bank to see what documents you need. You usually need to bring your articles of incorporation or organization, employer identification number (EIN), and personal identification.
Once you’ve created a separate account, it’s time to purchase bookkeeping software customized for small businesses. Load all of your previous bank transactions, set up your chart of accounts, and start categorizing transactions. Make sure to have a CPA or tax advisor check any transactions you don’t understand. Never, ever “guess” when it comes to accounting issues. Those mistakes can lead to hefty fines from state or federal agencies.
Your software will let you produce and review your financial statements. Compare the results to past periods and to your budget targets. Use these numbers to enhance financial forecasts and communicate performance to management and investors.
You also need to be prepared for an audit, so keep your records organized and up to date. This makes the audit process easier and less intrusive.