Definitive Accounting Tips For Small Businesses
It’s an invariable fact that behind every entrepreneurial startup, the primary motivation is a niche-related opportunity. Small business owners seldom consider the draining chore of inserting figures into ledgers and crunching the numbers.
While recordkeeping is assuredly not a leisurely task, it’s one every business must handle. Without a budget big enough to accommodate the costs of hiring a full-time bookkeeper or CPA, companies can’t stay afloat without owners knowing the basics of accounting.
Even if you’re just starting, the following bookkeeping tips for small businesses are enough to get your fiscal wheel rolling until you gain more hands-on experience.
The Four Crucial Steps For Accounting
This article will cover some simple bookkeeping tips that novice business owners simply can’t ignore. Following the right strategies and using the proper accounting software is technically all that it takes to keep your books coherent.
Use Accounting Software
If you’ve already set yourself up with a reputable accounting solution before cashing the first check or paying your first expenses, pat yourself on the back.
Setting up this invoicing software and integrating it with your company’s system is easier than you think. One of the most critical accounting software tips involves pursuing all the free options available.
Know that it’s easy to overlook what digital solutions can do for businesses in the long run. You’ll save yourself hours of work with this software in place. Moreover, the massive return on this investment is almost guaranteed.
To keep tabs on your business’s finances, you’ll have to create invoices, record, and track invoices, as well as pay bills and reconcile your payables. Manually doing all of these tasks can be quite overwhelming.
With an automated system in place, not only do your records go in your accounting ledgers promptly, its accuracy makes tax filing look like a breeze.
Keep Expenses Separate
Here’s another valuable accounting tip for you: keep a separate record of your personal and business expenses.
Start with getting a separate credit card for personal and business expenses and maintain the distinction with discipline.
Trust us when we tell you that one of the biggest mistakes fresh entrepreneurs make is failing to separate their business and personal expenses. This is a collective belief shared by most CPAs (Certified Public Accountants).
Maintaining this separateness is crucial to your business because it saves you hours of work during tax season.
If you don’t sort your business expenditures separately, filing for taxes can be messy. It becomes virtually impossible to track, categorize, and separate personal costs from those incurred by the company. You also run the chance of missing the applicable deductions.
Reconcile Your Accounts Every Month
Although it may seem obvious, this is the third most crucial tip for the accounting system.
Since your software gets fed regular data, reconciliation takes a few minutes, sometimes even seconds. Any financial leak can be instantaneously checked, provided you follow a standard record plan.
Incorporating an invoicing system into your digital solution helps create a balance sheet for your business. This document outlines your assets and liabilities.
With all the relevant information in place, you can proceed to run your reconciliation report and check to see if your finances require any tweaking.
Keep Tabs On Your Bookkeeping Reports
This area represents the easiest part of the accounting system. You have your (preferably payroll-integrated) expense and income tracking software all set up and running. Now it’s time to generate regular reports. There are generally three types.
- Start with a balance sheet: This sheet lists what you own against what you owe
- Get regular updates on your income statement: This statement keeps track of the incoming and outgoing cash. Income statements generally track your finances over a given period (monthly, quarterly, or yearly)
- Review your cash flow statements: This statement serves similarly to an income statement. Both keep track of the incoming revenue as opposed to the outgoing cash over a fixed period. The difference is that these statements keep track of the money exclusively. On the other hand, income statements consider non-cash elements, such as equipment value depreciation, in addition to the cash expenses
Regularly getting your hands on these reports will help you make smart financial decisions. Remember that while following these small business accounting tips enables you to steer clear of fatal business mistakes, it gets more complicated as your company grows. You can later hire financial expertise to ensure that you remain at the top of your game.
The Bottom Line
While accounting for your finances isn’t necessarily a perk, you don’t have to be overly qualified in this field to keep your records straight.
In case you can’t afford a professional accountant, following these simple bookkeeping tips will more than suffice.