When you start a small business, accounting issues start piling up immediately. It might be difficult, especially if you are not a finance person, to keep all the accounting details under check by yourself.
Bookkeeping and accounting are very integral parts of the business, and if you do not make sure they are on track can become overwhelming. There are some simple procedures to follow to make your accounting easier, read on to discover the top 11 small business accounting tips.
1) Have individual accounts for personal and business finances
One mistake people make is taking money from their business to fund their private expenses and vice versa. When you provide capital for your business from your personal finances, you should properly document this addition.
Try to maintain a different bank account for your business; this will help you get on track and manage finances better.
2) Monitor all expenses
Document every expense made for your business, knowing how much you spent and on what will help you understand what is important and what exactly you have been spending money on.
If possible, use your business credit card for most business expenses. They are easier to keep track of and record than cash receipts. There is also simple accounting software that can help you track your expenses.
3) Keep detailed records of all income
Sometimes, income can come in from many different sources, and it is easy to lose track of them. If you are not sure how much income you are getting, you may underpay your taxes and get into trouble with the IRS.
4) Hire an industry professional
If it gets overwhelming, you can consider hiring an accountant or bookkeeper, even if it is temporary. Within a few hours, all your books and accounting problems could be solved for a small fee. The bookkeeper will make sure your income and expenses are correctly recorded, while the accountant will make sure your taxes are up to date.
A professional who is familiar with financial laws can save you from possible trouble with officials.
5) Make life easier by using accounting software
Technology can come to your rescue. There are many accounting software that can help you track your expenses and income and categorize them. You can link your credit card to some accounting software and automate your bookkeeping process.
6) Allocate time to bring your books up to date
You might have a hectic schedule, and bookkeeping and accounting might be forgotten while trying to keep up with the day to day events. It is advised that you have a set day for bookkeeping. You can set a reminder on your phone or computer or mark it on your calendar.
7) Track all labour expenses
For most businesses, labor takes up more than 60% of the budget. You should have a proper record of how much each person is paid and have a system to track overtime and other incentives so that you do not end up overpaying or underpaying anyone.
8) Make allocations for key business expenses
Significant expenses will always happen-things like rent, computers, and equipment repair and replacement count as them. You should always try to plan for these expenses, some can be unexpected, but you should still be prepared. The good thing is that with major costs, you get reduced tax in the year of purchase.
9) Maintain Inventory
You should have a record of items purchased. If you are not sure of what you have in stock, you run a risk of acquiring losses through loss or theft.
10) Pursue all outstanding invoices
If you have sent an invoice to a company, sometimes you have to do proper follow up to get paid. Have a record of customers who are owing you send them friendly reminders often. Some people attach incentives for early payment to encourage people to pay on time.
11) Establish financial forecasts for the future
You should learn how to forecast where your business will be financially within the next couple of years. You can use the available profit and loss statement to estimate your company’s progress in a few years. With this, you can know when to invest and when it is time to consider a loan.
Money is essential to every business; keeping track of your expenditure can save you from unexpected financial troubles, including getting into trouble with the IRS. If you can, get in touch with an accountant and employ accounting software to make money management more comfortable for you.