Proper accounting and bookkeeping is at the heart of an efficiently managed business. Here are expert accounting tips for small business owners.
Have you ever wondered why some businesses thrive today, only to go bankrupt later?
Could it be for lack of sound bookkeeping knowledge or perhaps their village people?
Well, fact is, your business is sure to suffer as a result of poor accounting habits.
For instance, you can’t claim tax rebate for expenses that were improperly documented; hence paying more in taxes.
You might miss out on repaying debts and incur overdraft fees; plus other myriad of problems that may arise due to poor accounting.
So, as an entrepreneur who intends to succeed in your business, there are essential accounting tips you must comply with in your business to ensure a smooth running of your company.
Accounting Tips For Small Business Owners
Here are some smart accounting best practices you can implement right now in your small business:
Separate Business and Personal Finances
This is one of the most common mistakes entrepreneurs make, and it has led many businesses into sudden extinction.
Mixing your Business and Personal expenses and income is very detrimental to the growth of your business and may lead to several issues, including big tax headaches, excess debts, untraceable financial transactions, among others
This is why you need to maintain separate account for yourself as well as your business.
You also need to ensure that every transaction reflect on the appropriate books of account.
By so doing, you will be able to trace your finances, know your business’s current financial health, make sound financial decisions, but to mention a few.
Track Every Expense
There are some expenses that appear little at first sight, but the plain truth is that they may end up becoming problematic for the business in the long run.
It is imperative to always keep and revisit expenses incurred on several things in the business, including the labour, salaries and incentives, purchases, raw materials, logistics, inventory, etc.
When the expenses are properly recorded, it will be very easy to identify certain costs that are consuming larger percentage of the business funds. It will also help in identifying projects that are not contributing to the positive growth of the business.
When all these are identified, it will help the business in eliminating unnecessary costs that would’ve become problematic in the nearest future.
Know the Basics of Accounting and Bookkeeping
Without proper accounting knowledge, you may find it difficult to handle some finances-related tasks, which will surely have a negative impact on your business.
This is why getting adequate accounting and bookkeeping is a must for you as an entrepreneur.
Perhaps your business is not financially buoyant to hire a professional accountant, you as the owner must acquaint yourself with bookkeeping and accounting by learning the basics and the cores.
Even if you have the money to hire a qualified personnel, it is still important to get the knowledge yourself as it will help you in running your business smoothly and effectively.
Fortunately, there are several ways you can learn the basics of bookkeeping and accounting, which include:
- Enrolling in any free online courses that teach the basics of accounting and bookkeeping.
- Participating in any seminar on accounting and bookkeeping.
- Reading books that talk extensively about accounting and bookkeeping.
- Watching videos on accounting and bookkeeping, etc.
Consider Hiring a Professional
Although it is cheaper to keep your accounting records manually, but it is much better to hire a Professional to help handle the task – either on a permanent or part-time basis.
Whichever way, hiring qualified finance personnel can make a big difference in your business.
Some of the key benefits of hiring a Pro is that they can:
- Help keep your records up-to-date and orderly.
- Help handle complex financial issues in your firm.
- Assist in meeting all your desired financial goals and aspirations.
- Assist in filing taxes and getting tax advantages.
- Help you with strategic planning.
- Identify certain financial loopholes in the organization, etc.
Do a Periodic Checkup.
Your business’s financial health is just like your personal health; it must be subjected to regular checkup in order to be in good shape.
Therefore, always set a periodic time for reviewing your books of accounts – this could be weekly, bi-weekly, monthly, or quarterly.
This constant review will undoubtedly make a huge difference in your business as it will help you in pinpointing positive and negative trends in your business, making informed financial decisions, achieving your goals faster, and lots more.
Automate Your Accounting Processes Where Necessary
Gone are the days when accounting has to be done solely by human being; there are lots of potent accounting software available now, and the good news is that these software are even faster and more accurate than humans.
A good accounting software will help you in:
- Record all your income and expenditure.
- Link your business’s bank account or credit card.
- Track your business’s income and expenditures.
- Generate up-to-date financial reports.
- Send and paying of invoices, etc.
However, before deciding to choose any accounting software, make sure you go for the type that best suits your current business needs and financial capacity.
Also avoid spending big on software if the tasks can be done perfectly without the use of software.
For instance, Payroll can be easily done using Microsoft Excel. Remember, excessive spending on irrelevant software will add up to your expenses, so beware!
Additionally, it is recommended you opt for cloud-based software when choosing an Accounting software so that you will be able to access your finances everywhere you go. These platforms are also optimized for safe backups and robust security.
Some of the top-rated Accounting software you can use for your business are – Quickbooks, Kashoo, Invocera, Xero, etc.
Define a Minimum Profit Level
Yes, it is very important to keep track of your finances, but it is also important to understand your profit as well i.e. you need to first know your business’s current income and expenditure.
And then set a minimum income level that the business must generate monthly to be able to break even and yield more profit. This will help in achieving your overall financial goals faster.
Keep Track of Your Debtors
There’s no way you can prevent credit sale in your business; you can only limit it to an extent.
When situations like this occur, it is best you always keep track of your debtors, and do everything in your capacity to make them repay the debt as soon as possible.
You can as well create an extensive list for the debtors in a separate account and send them regular reminders to stimulate their repayment process.
Remember, the more debtors you have, the lower your profit will become. Therefore, track them as much as possible.
Though, this list is not exhaustive; it however gives you starting point to implementing accounting best practices in your business.