As a small business owner, you are juggling multiple tasks at once, and it might be difficult to take care of your bookkeeping & accounting process. Creating financial records can be one of the most difficult parts of running a business. It is essential to be efficient and effective with the bookkeeping & accounting process to run your business to its fullest potential. When you’re just starting, you might not have the resources to hire an accountant or outsource accounting services. That is where these tips come in! With time and effort put into them, they’ll make this task a lot easier and less daunting. This article gives 10 top tips for best organizing your finances and minimizing the stress of running your own business.
Separate your business and personal finances
In order to avoid any problems in the future, businesses should again separate their business and personal finances from day one. This helps prevent a wide range of potential financial issues that could arise.
Sorting of personal transactions can be time-consuming and expensive, as summarizing every transaction results in mistakes. Also, you have to calculate business deductions which are applicable only on business finance. Removing all personal transactions from your business accounts will simplify the bookkeeping process.
Make necessary reimbursement
There might be a time when you have to use personal finance for business purposes. It is suitable for you to make the necessary reimbursement as soon as possible. Remember, this is not part of your salary and should be treated just like how you treat employees’ reimbursement.
Select the right accounting method
Accounting methods vary by business. Some entrepreneurs use the accrual method, while others prefer cash-based accounting. There are advantages and disadvantages of each method, which is why it’s essential to do your homework before choosing what is right for you. You can take assistance from your accounting services provider on this matter as this is a critical factor, and a change of accounting method in due course of operation will create much confusion.
Keep records of business expenses
There are many ways to keep track of your expenses, but the best way to make sure that you have a good record is to either take pictures of receipts or enter them into your account every month. This can be time-consuming and tedious, but it will help you avoid making costly mistakes.
Conduct daily bookkeeping
Many small business owners overlook the importance of daily bookkeeping. It is a simple task that can be accomplished without too much effort. Daily bookkeeping is essential because it helps you keep track of income and expenses, which can help you make better financial decisions for your business.
Automate whatever you can
Bookkeeping and accounting are some of the most important aspects of keeping a business running smoothly. To keep these processes going smoothly, you are recommended that you automate as much as possible. This means setting up software to calculate the books and even do bookkeeping for you automatically. A lot of accounting processes can be automated, like payroll, invoicing, reconciliation, etc.
Analyze accounting reports regularly
The first thing you need to do when assessing your financials is analyze any generated reports. This will allow you to identify areas of opportunity and make informed decisions about where you can improve. It is your job to keep updated with any change in your business’s financial health.
Keep a close eye on accounts receivable
This is the number one most important thing a business owner can do. Sure, employees are expected to pay their dues and live up to their promises, but ultimately it’s on the owner to make sure that every single penny of revenue comes in. That means staying on top of all your receivables and watching for suspicious activity.
Optimize your accounts payable
Account payables are not something to be taken lightly. The less money you pay for your bills, the more money you have left to build your company or take care of other expenses. But at the same time, you can not let accounts payable amounts grow to a level that can disrupt your workflow. A perfect balance must be maintained while ensuring Days Payable Outstanding (DPO) is healthy.
Monitor your cash flow regularly
Before you start a business, you need to be sure that you can make enough money. Losing money is not an option. A proper budget and financial plan will help ensure that your small business stays afloat and out of debt. Tracking your cash flow regularly will allow you to keep an eye on the amount of money coming in and going out. Tracking your cash flow regularly will help you tackle any disruption or take advantage of opportunities.
Budget & forecasting is essential
Budgeting and forecasting will enable you to stay on track with your goals. It will also allow you to pave a way to achieve your goals. Without budgeting and forecasting, you are working on a business without a vision or purpose, which will negatively impact your business. Budgeting lets you know where your money is going and what you can spend on things that might be a little riskier. When it comes to managing cash flow, having the ability to forecast your expenses, inventory, and revenue will help streamline your operations.
Learn about every business deduction you can opt for
When it comes to getting tax deductions for your business, the list is relatively long. However, you might deduct various other purchases that you make from your business, including home office expenses, cell phones and data plans, or even books and software. Some of these items are standard, while others are specific to your industry, like marketing materials or software. You must learn about every deduction or take assistance from your bookkeeping and accounting services provider. It will help you reduce your taxable income significantly, helping reduce unwanted expenses.
Stay on top of tax deadlines
To avoid penalties, it is vital that you stay on top of your tax deadlines. It is not just the actual tax deadlines but also the dates for when you need to submit your annual returns and when you need to file your quarterly reports. It would be best if you never missed these dates. If you are behind on your tax deadlines, you might have to pay a fine or penalty and deteriorate your relationship with the tax authority.
Hire a Professional
Hiring a professional for your bookkeeping and accounting needs is a wise move. Professional bookkeeping and accounting services providers will ensure that you are spending your money wisely, can work more efficiently in your own time, and protect your business from potential liabilities. A professional will also help you evaluate whether you are spending your business time efficiently.
Hiring a professional can increase your productivity tenfold. Hire someone and have them take on the tough tasks for you. Not only will this reduce your workload, but it could also save you money and give you peace of mind.
One of the most important things to remember is that change will always be inevitable. Business is a dynamic environment that can never be predicted and constantly evolves, and your business is not immune to change. Just because you have been in business for a few years doesn’t mean it is time to change your accounting system. In fact, you should look into new systems every two or three years so that you’re constantly moving forward in your business rather than falling behind.