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10 Accounting Tips for Small Businesses

No matter the type of business that you have, you will always need to pay attention to numbers. In this article, I am bringing to you 10 Accounting Tips for Small Businesses.

For many business owners, one of the most critical and scariest aspects of running a company or some sort of business is managing the finances. If you don’t know how to keep your money in order, you can get into problems faster than you think. Fortunately, money managing skills can be learned. Here I give you 10 business tips that can be helpful for your company.
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1. Keep Accurate Records

When you own a business, regardless its size, you need to learn how to do some accounting. Keeping good records is very important to your business. Good records will help you to:

• Identify sources of your income
• Monitor the progress of your business
• Prepare your financial statements
• Keep track of your deductible expenses
• Prepare your tax returns
• And more…

2. Sort and file receipts

Keeping an accurate count and file of all receipts can seem tedious, but it will save a lot of headaches in the future. It’s a laudable goal to make sure you keep all receipts related to your business, but real receipt accounting goes well beyond just retaining them. You might think it’s unnecessary to keep receipts since practically every purchase is electronically stored. However, sales slips contain dates and expense details that can be very helpful for future reference.

Receipts come in all shapes and sizes, and their ink fades over time. Photocopy (or scan) receipts to a standard letter-sized page, then collate them by date to correspond with your detailed financial records.

Additionally, it will really help categorize the expense (and subsequent tax deduction) if you highlight the date and make notes about the reasons for expenses on the photocopied receipt page itself.

3. Do accurate invoicing

Invoices are very important documents. They are not only a physical or virtual sheet to ask your clients to make payments. No, they are much more! They’re records of the terms of a transaction and its details. Due to this, it’s critical that you enter information that is accurate and complete. Try not to confuse them with receipts, as they are different.

Reworking or adding to an invoice, creating multiple versions, or canceling an erroneous invoice will only confuse the accounting process… and your accountant. Don’t do it!

Additionally, accurate invoicing ensures that if any questions come up from your clients, you will be prepared with a record of previously-agreed-upon terms under which you and your clients operate.

4. Hire a Professional Accountant

When entrepreneurs or small business owners are starting, they use to act as head of accounting, sales, and marketing at the same time to cut costs. And while this might work for some time, the truth is that you will not be able to manage all the areas of your small company and do it well in all of them.
You need to engage the services of a professional to set up your accounting system.

You should consider hiring a bookkeeper or an accountant to make sure you aren’t racking up the errors. The experience and knowledge of this professional will help you a lot, because they know to deal with numbers. You might have a general idea of what to do, but they see the big picture behind the numbers.

A professional accountant will bring you peace!

5. Monitor the daily expenses and take notes

It’s always a good idea for business owners to keep records of everyday expenses they incur in the company. Instead of calculating expenses every two weeks for payroll purposes, focus on every day or every week. This can help you have a better idea of where finances are each week and how much money you’ll need to budget for in the upcoming weeks.

The foundation of solid business record keeping is learning to track your expenses effectively. It’s a crucial step that allows you to monitor the growth of your business, build financial statements, keep track of deductible expenses, prepare tax returns, and support what you report on your tax return.

6. Open a Business Bank Account

When you mix personal and professional finances, the results can be disastrous. One of the first steps you should take when starting a new business is opening a new bank account under your business‘s name.

Keeping your personal and professional finances completely separate makes tracking the flow of money a breeze. Plus, having a separate bank account also makes your life much easier when tax filing season rolls around.

If your company is a sole proprietorship, you aren’t legally required to open a separate bank account for your business, but it is still strongly recommended that you do so. Before you can open a business account, you need a business name, and it must be registered with your state or province.

7. Save Money for Taxes

Paying your taxes is a must. It’s a good idea to involve your tax payment as part of your expenses to avoid non payment penalties from piling up. So systematically put money aside for it. Unpaid taxes can incur penalties and interest, so make sure the money is there when you need it. This is a form of evitable debt that you can avoid.

By having an organized business and putting money aside each month for tax purposes, it will be easier for you to pay them when they are due.

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pay attention to your invoices

8. Pay attention to your Invoices

It’s not a secret that late and unpaid bills can hurt your cash flow. Assign someone to track your billing, and make sure that you have a process in place when (or if) a bill goes unpaid. That can be issuing a second invoice, making a phone call and even levying penalties such as extra fees at certain deadlines.

Make a plan for the clients that are 30, 60 and 90 days late. Remember, every late payment is an interest-free loan that hurts your cash flow.

9. Make Periodical Reviews

Always set out time constantly to balance and reconcile your accounting books both online and offline. It can be weekly, or monthly; whichever works for you. This way, you will keep ahead of your finances and know when your business starts defaulting. You should always take note of your monthly and even daily account balances. If someone is doing it for you which is the necessary thing, always take time to occasionally check and ensure that they are being done, and done correctly.

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go online

10. Go Online

In the digital world there are solutions to many needs that human beings might have, and of course, there are accounting software that will help you make your accounting tasks easier, faster and more precise. Examples of online bookkeeping software you can use for your business include: Kashoo, FreshBooks, Xero and QuickBooks online. There are also desktop versions of some these programs. You can also opt for cloud storage of your data to help you have access to them whenever you wish, and avoid loss of data. Paperless accounting is not only important, but also a super-efficient way to automate the accounting procedures.

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Three important reasons why you should use an Accounting System:

• It 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 going down? So, your account records helps you know if your business is growing, stagnant or failing.

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• 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 or order for new stocks. 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.

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• 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.

And last, but not least, consider having a website for your business, this is extremely important in today’s world.

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CONCLUSION

Accounting is, and always will be, a critical function of the savvy business owner, but accounting doesn’t have to be a nightmare or something to dread. It just takes a little perseverance and planning to ensure that your records are as accurate and complete as possible.

In conclusion, it is important for you to 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 at any time you start getting confused when keeping your accounting records, don’t hesitate to seek the advice or services of a professional accountant. Also, as your business begins to grow and expand, the services of a professional accountant may become inevitable.

Look for an accountant that not only will work with you, but also will assist you to meet all your financial goals or objectives.

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It's a Social Media and digital marketing consultant and owner and founder of LFStudio.com. He is also author and entrepreneur. He helps small businesses to grow, get clients and generate income.

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