Tips to get your small business accounting practices in order
Accounting is by far one of the most important aspects of starting and operating a successful business. Getting the back-office basics of your small business accounting practices in order early on – tracking revenues, expenses, and costs will keep you out of the weeds of paperwork and cash flow mess, and onto the important work of growing your business.
Why is good accounting practice important?
Helps You Evaluate the Performance of your Business-: A good accounting system gives you a thorough overview of the financial performance of your business. If you don’t have an accounting record, how will you know if your business is growing or depreciating? So your account records helps you know if your business is growing, stagnant or deprecating.
Helps You Manage Cash Flow and Meet Deadlines-: Cash flow management means knowing what you do with the cash that comes into the organization. Your accounting system helps you know areas that need cash. For instance, cash may be needed to finance your debts, or make major renovations, and it is your accounting system that will help you know this. In short, no business will growth further without a good cash management system. Also, your accounting books help you know when bills like your rent needs to be paid.
Needed for Business Goal Setting-: Your accounting system will help when setting new business goals for the week, month or year, as seeing the business performance for the last financial year will help you project and set goals for the New Year and plan ahead of the business.
Here’s some of our tips;
1. Separate Business and Personal Expenses: Have a dedicated business bank account right from the start. Keep your business and personal finances separate. This way you can track the financial performance of your business more efficiently.
2. Get It Online- Examples of online bookkeeping software you can use for your business include Xero and QuickBooks online. Cloud storage of your data helps you have access to them whenever you wish, and avoid loss of data.
3. Track Every Expense – Label and categorize each expense, and track your cash flow. Use your business credit cards for all purchases and you won’t end up with a wallet full of paper receipts to sort through. But when cash is your only option, file digital copies of receipts to your accounting software.
4. Accurately Record Deposits – Loans, revenue from sales and other cash infusions are easy to lose track of, and that can lead to paying unnecessary income taxes. Ask your accountant for the best small business accounting practice for recording these deposits.
5. Keep Tabs on Labour Costs – Paying employees, including yourself, may be your largest expense. Take note of overtime, perks, and other benefits you offer to prevent over- or under-paying.
6. Follow Up on Invoices and Receivables – Just because you’ve sent an invoice doesn’t mean you’ll get paid. Avoid overpaying on taxes and hours spent sifting through your revenue account and receivables listing by circling back with vendors who owe you money. Accepting online payments and using cloud-based accounting software can help automate this process for you. If you choose to outsource your accounting function you could have the team to chase and monitor the payment on your behalf.
7. Understand When It Pays to Pay – Hiring a professional bookkeeper or accountant, even for just a few hours a week or month, can make a big difference. Your records will be up-to-date and orderly, and a pro is better equipped to know about potential fees, loopholes or additional tax deductions for which you may be eligible. When you outsource your accounting needs you can free up your time to focus on growing your business.
It is important you know that no business can be run successfully without proper accounting and financial documentation. So the earlier you start setting up an accounting process for your business, the better for you and your business. If you find that managing your books is too tedious or time consuming, you could consider engaging the services of an outsourced accounting firm with the expertise of the professionals to do your books.