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Small Business Finance

Are You Overlooking Business Liabilities? Learn What You Owe and How to Manage It

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Liabilities_3

When most business owners think about their finances, they tend to focus on what’s coming in (income). But what about what’s going out?

That’s where liabilities come in. And while the word “liability” might sound negative, it’s not necessarily a bad thing. In fact, understanding your liabilities is essential for making informed financial decisions, planning for growth, and keeping your business financially healthy.

What Are Liabilities?

Liabilities represent what your business owes to others. This could be bills to pay, loans to repay, or taxes you haven’t yet filed. Simply put, liabilities are obligations that your business is committed to paying in the future.

Here are some common examples of business liabilities:

  • Loans – Bank loans, SBA loans, or lines of credit
  • Accounts Payable – Unpaid vendor or supplier invoices
  • Credit Cards – Outstanding balances for business purchases
  • Taxes Payable – Payroll, sales, or income taxes you owe
  • Wages Payable – Salaries or benefits you haven’t paid yet

To get a better handle on what your business owes, liabilities are broken down into two main categories:

Current Liabilities

These are debts or obligations that are due within one year. They affect your short-term cash flow and day-to-day operations.

Examples:

  • Unpaid bills (accounts payable)
  • Payroll taxes
  • Monthly loan or lease payments
  • Credit card balances

Non-Current Liabilities

These are long-term debts or commitments due after one year.

Examples:

  • Multi-year business loans
  • Equipment leases
  • Business vehicle loan

Why Business Liabilities Matter

Paying attention to what you owe is just as important as tracking what you earn. Here’s why:

  • Helps manage cash flow – Knowing when payments are due keeps you from running short unexpectedly.
  • Guides smarter spending – Avoid overspending when you’re already committed to debt payments.
  • Builds lender confidence – Clean, well-managed liabilities show you’re financially responsible.
  • Affects your business value – Liabilities reduce your equity—the true value of your business.
  • Prompts early intervention – If debt is rising faster than income, it’s a warning sign to adjust.

Liabilities Are Not Always a Bad Thing

Some liabilities can actually support your growth. For example, borrowing to buy new equipment or expand into a new location might create temporary debt, but that investment can pay off over time.

The key is managing debt wisely, and keeping liabilities in proportion to your business’s ability to repay.

Here are a few liability pitfalls to watch out for:

  • Mixing personal and business debt – Always keep these separate for legal and tax reasons.
  • Over-relying on credit cards – Easy to swipe, but interest adds up fast.
  • Ignoring loan terms – Not all debt is created equal. Some loans come with hidden fees or balloon payments.
  • Delaying tax payments – Penalties and interest can grow quickly and hurt cash flow.

How to Stay on Top of Liabilities

  • Review your Balance Sheet regularly – It shows exactly what you owe.
  • Reconcile accounts payable – Make sure bills are paid on time.
  • Use accounting software – Helps you stay organized and track when bills are due.
  • Build a cushion – Save a bit extra when business is strong so you’re covered when it’s not.

Final Thoughts

Keeping track of what your business owes doesn’t have to be intimidating. It’s simply part of running a business. Knowing what you owe helps you make smarter decisions, avoid cash flow surprises, and build a more resilient business.

Whether you’re just starting out or growing quickly, make it a habit to look beyond income and focus on the full picture. Because in business, what you owe is just as important as what you earn.

Assets and Liabilities Made Simple: A Guide for Small Business Owners

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Scale_Assets vs Liabilities

Most business owners spend a lot of time looking at their Profit & Loss Statement—it’s familiar, tracks income and expenses, and speaks the same language you probably use daily. However, another financial report is just as important: the Balance Sheet.

The Balance Sheet can feel less approachable. It uses terms like “assets” and “liabilities,” which might not come up in your regular conversations. But once you get the hang of it, this snapshot of your business’s finances can give you powerful insight into how your business is doing.

Let’s focus on one of the most important things the balance sheet tells you: the difference between assets and liabilities—and why that difference matters.

What Are Assets?

Assets are everything your business owns that has value. Such as tools, resources, and items that help you run your business, generate income, or hold long-term value. Some are physical, others are not—but they all count as part of what your business “has.”

Examples of assets:

  • Cash – Money in your business accounts or on hand
  • Accounts Receivable – Payments owed to you by customers
  • Inventory – Products you plan to sell
  • Equipment and tools – Computers, vehicles, machinery, etc.
  • Property – Buildings or land owned by your business
  • Intangible assets – Things like trademarks, copyrights, and brand value

Assets are usually grouped by how quickly they can be converted into cash:

  • Current Assets – Cash, inventory, receivables—anything you can expect to use or convert within a year
  • Non-Current Assets – Equipment, property, or anything that will last longer than a year

What Are Liabilities?

Liabilities are what your business owes. These are debts or financial obligations—money that needs to be paid to lenders, vendors, or agencies. It’s never fun to think about what your business owes, but having a clear picture of those obligations can help you manage your cash flow.

Examples of liabilities:

  • Loans – Business loans or lines of credit
  • Accounts Payable – Bills you owe to suppliers or service providers
  • Credit Cards – Any outstanding balances
  • Taxes Payable – Amounts owed to tax authorities
  • Payroll Liabilities – Wages or benefits not yet paid

Like assets, liabilities are also grouped by timeframe:

  • Current Liabilities – Payments due within a year
  • Non-Current Liabilities – Debts that extend beyond a year, like long-term loans or leases

Why It Matters

Understanding the difference between what you own (assets) and what you owe (liabilities) helps determine whether your business is on solid ground or heading for trouble.

Here’s why this matters:

  • It shows your business’s stability. You’re in a good position when your assets are greater than your liabilities. That typically means you have enough breathing room to cover your debts and still operate smoothly.
  • It affects your ability to borrow. Banks and lenders consider your assets and liabilities when deciding whether to extend credit.
  • It helps you plan ahead. If liabilities are climbing and assets aren’t keeping pace, that’s a red flag. You may need to adjust spending, pricing, or collection efforts.
  • It tells you your business’s value. When you subtract what you owe from what you own, you’re left with your equity—the part of the business that truly belongs to you.

A Simple Way to Think About It

If you think of your business like a house:

  • Assets are everything inside—cash, furniture, appliances, tools, and the house’s value.
  • Liabilities are the mortgage, credit card bills, and any repairs you still owe money on.

What’s left after subtracting the debts is your equity—which is what you own.

Final Thoughts

The balance sheet might not be your go-to report, but it can tell you a lot about your business’s health—and it starts with understanding what you have vs. what you owe.

Get Paid Back: How to Track Reimbursable Expenses in QuickBooks Online

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If you ever cover costs upfront for a client, whether it’s buying materials, paying a subcontractor, or driving to a job site. In that case, those are reimbursable expenses, and you need to get that money back. QuickBooks Online (QBO) makes this simple with a built-in feature called Billable Expenses.

Here’s how to use it, and why it matters for keeping your projects profitable.

What Are Reimbursable (Billable) Expenses?

Reimbursable or billable expenses are costs you incur on behalf of a client that you plan to invoice back to them. Instead of keeping a mental list or chasing down spreadsheets later, QBO allows you to link those costs to a specific customer or project right at the time of entry.

Some common reimbursable expenses include:

  • Materials or supplies purchased for a client job
  • Payments to subcontractors doing work for a client
  • Mileage, lodging, or meals tied to a specific client visit or project

Capturing these accurately means:

  • You get paid back
  • Your profit margins stay healthy
  • You don’t leave money on the table

Step 1: Turn On Billable Expenses in QBO

Before you can track these expenses, make sure the feature is enabled:

  • Click the Gear icon in the top right
  • Select Account and Settings
  • Go to the Expenses tab
  • In the Bills and Expenses section, toggle Make expenses and items billable to ON
  • (Optional) Set a default markup percentage if you add a service fee
  • Click Save, then Done

Step 2: Record a Reimbursable Expense

When you pay for something on behalf of a client, here’s how to enter it:

  • Click + New, then choose Expense, Bill, or Check
  • Enter the vendor and details as usual
  • Check the Billable box
  • Select the correct Customer or Project
  • (Optional) Enter a markup percentage

Tip: Be specific in your memo or description field—it makes invoicing smoother and clearer for the client.

Step 3: Invoice the Client for That Expense

When you’re ready to bill the client:

  • Click + New, then Invoice
  • Choose the customer or project
  • QBO will prompt you to Add Billable Expenses
  • Review the items, adjust if needed, and click Add to include them

You can choose whether or not to show the full detail to your client and even add a custom note if needed.

Stay Organized with These Reports

To avoid missing billable items, use these helpful reports regularly:

  • Unbilled Charges Report – Shows costs tied to clients that haven’t been invoiced yet
  • Time Activities by Customer Detail – Great if you track time and need to see what’s billable
  • Profit and Loss by Customer – Helps you see where reimbursables fit into your overall income

A Few Tips for Better Reimbursable Tracking

  • Tag the customer at the time of entry  – don’t leave it for later
  • Be clear in your client agreements about what you’ll charge for
  • Review monthly to catch anything unbilled
  • Use Projects or Classes for more advanced tracking if needed

Final Thought

Tracking reimbursable expenses in QuickBooks Online might seem like a small detail, but it’s one of the easiest ways to protect your bottom line. With a few simple steps and consistent habits, you can bill with confidence, stay on top of client-related costs, and get paid for every dollar you spend on their behalf.

It’s your money, so make sure it comes back to you.