Small business accounting 101 – we’ll tell you 7 of the most important things to consider when looking at how to optimize your small business accounting.
Small Business Accounting Strategies to Boost Your Business
Business accounting is crucial, whether your company consists of just you or you’ve got a small business that’s starting to expand. Small business accounting is often a daunting prospect for business owners. Unless they’ve got extensive experience in managing a range of different businesses or have taken a small business accounting course, the odds are that the skills required for effective accounting are not necessarily ones that they already possess.
However, if you bear in mind a few simple points, it’s easy to get your accounting into a manageable state where matters are never in a position to get out of hand.
The following are some of the simplest and most effective small business accounting best practices to consider when it comes to your business accounting:
Make the Leap from Paper to Digital
Small businesses are always going to handle a certain amount of physical paperwork. Receipts, invoices, and other associated bits of bureaucracy tend to build up no matter what you do. But while there’s no way to ever completely get rid of paperwork, what you can do is store the physical stuff and digitize it all for easy access.
Digitizing your paperwork with a small business accounting excel template makes it far easier to manage, taking seconds to track down a particular sale or customer. Plus, the stored data offers a huge amount of potential in terms of marketing plans and data analysis. But focusing on accounting, a digital system for keeping track of your accounts is essential in this day and age.
Many larger businesses are already moving towards an entirely digital form of bookkeeping. While this may not be necessary for your business, digitizing your paperwork is still an essential accounting step.
Consider Hiring a Professional
Small business accounting is generally manageable. At the same time, if you’ve got the small business accounting fees to pay for a professional, it may be more beneficial for you.
Small business accounting services remove a huge amount of hassle, and also reduce the chance of making mistakes when filing things like tax returns. Professionals can also prove incredibly useful when it comes to expanding your business.
Managers can look at the numbers and give you solid advice on your potential for moving forward. While they may not have experience in your particular industry, they can still give you a detailed analysis of how your business is going.
Keep Track of Every Transaction
When running a small business, it can be easy to only focus on the more important transactions and assume the smaller ones are less expensive. However, this attitude has been the downfall of many a business. Every transaction should be recorded in an efficient manner, and the details should be easily accessible to you if you need them.
You’ll be grateful for this when the time comes to make calculations at the end of the business year. As we’ve already pointed out, digital platforms are the ideal tool for keeping track of small business accounting online. They’re fast, convenient, and allow for lightning-fast searches.
It’s also worth mentioning that, even if you have casual agreements with clients and suppliers, they still need to be recorded. Without a solid set of records, any mistake will go unnoticed, and you’ll be relying on memory alone to track down the error.
Keep Your Business and Personal Accounts Separate
One of the biggest mistakes you can make as a small business owner is allowing the line between personal and business to blur. As a quick wiki search shows, even some of the biggest businesses have collapsed over this problem. This cut both ways. Obviously, it’s easy for a business to collapse if its owner starts treating the company pot as their own wallet. Just because it’s the money your own business has made, that doesn’t mean you should treat it as a personal bank account.
At the same time, plowing your personal finances in to make up for any shortfall in the small business accounting cost can have disastrous consequences. Business owners use a business account to keep their company money separate from their personal cash. But if you’re handling hard cash yourself, it can be all too easy to start occasionally treating it as your own money. If left unchecked, this can quickly lead to discrepancies that start to wear away at a company.
Obviously, there are simple checks in place, like establishing a company bank account. But the most important thing to consider here is your mindset. You need to always bear in mind that company cash is either plowed back into the company or paid out to yourself and your employees in the form of official wages.
Accounting Software Can Remove Unnecessary Effort
Quality accounting software such as QuickBooks can make your small business accounting methods as easy as possible. These programs have been designed so that even a person with limited digital experience can get the most out of them. They’re reliable, and there are many great options available at the moment that are affordable to most.
Accounting software follows on from what we’ve said about digitizing your records. While it’s fairly straightforward simply setting up an online drive for storing your accounts, digital software generally proves far more helpful at keeping you up to date and warning about any errors. In addition, familiarity with accounting software is a great help if you take any interest in data analytics.
In a nutshell, data analytics uses digital algorithms to draw up accurate analyses of your current business state and creates predictions for the future. It’s an area that is moving forward in leaps and bounds and definitely one to consider investing in.
Make Sure Everyone Is Reading from the Same Page
While you may be sure you know what your small business accounting needs are, this may not always be the case. At the same time, your employees and partners may be unaware of developments you assumed they were familiar with. This is where the importance of social psychology and meetings comes in.
You should make sure that you set aside a certain amount of time every month or so to go over your finances with the relevant people in your company. This is important for a number of reasons. First of all, it’s obvious that by dedicating a certain amount of time to accounts, you can focus on an aspect of your business that may otherwise go unnoticed. Secondly, by meeting with other relevant parties, you can get a full overview of exactly what is happening in your company.
If there’s an issue of some kind, regular meetings can alert you to it early on, while also giving you the opportunity to come together with others to create small business accounting solutions.
Keep Track of Payments Due
With a small business, it can be surprisingly easy to lose track of payments due. Especially small businesses that handle cash and often rely on a few regular customers with particular deals set up. Without a good accounting system, it can be hard to keep track of what’s owed to you and let payments fall into arrears and eventually vanish. Without some kind of digitized, or at least well-planned, system of keeping track of payments, you’re always going to be at risk of working for free.
This is especially true if you run a mail or online business – payments can fail to go through, fail to appear, or the customer can simply lose track of things related to small business accounting basics. Handling such situations can become difficult, particularly because both parties are communicating by email rather than face to face.
Accounting software can help you keep track of payments and automatically reach out to customers when there’s anything outstanding.
Conclusion
Poor accounting has been the downfall of many companies, both large and small. Finances are the lifeblood of any company, and without attention, it’s easy for unpredicted problems to emerge and overcome even the most solid of companies.
However, as we’ve seen, there’s plenty you can do to stay one step ahead of any potential issues. The above are some of the most effective and simplest small business accounting tips you can use to ensure that you’re in complete control and ensure your company has a bright future.
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