As a small company owner, you’ve got a great deal on your plate. You are responsible for sales, marketing, operations, and sometimes customer service. As a result, it can be difficult to discover time to focus on the financial side of your business as well.
Most business owners aren’t accountants, but you know the importance of healthy finances for your business. So, how can you make sure your accounting is in good shape?
We teamed up with Walker Hill to put together a list of seven tips to get your small business accounting in order.
1. Separate Your Business and Personal Accounts
Many entrepreneurs make the mistake of blending their personal and business finances. It can make it difficult to track expenses and manage your cash flow. Therefore, opening a separate bank account and credit card for your business is important. It will help you keep better records and avoid accidentally mixing up your personal and business expenses.
2. Get Organized with Record-Keeping
Another important tip for keeping your small business accounting in order is to organize your record-keeping. Keep receipts and invoices for all of your business expenses in one place. You can use an app or software like QuickBooks to track your finances and create digital records. It will make it easier to prepare your taxes at the end of the year and spot any red flags in your spending.
3. Choose the Right Accounting Method
There are two main methods of accounting: accrual and cash-basis. The accrual method records income when it is earned, regardless of when the money is received. The cash-basis method only records income when it is received.
Most small businesses use the cash-basis method because it is simpler and easier to track. However, you may want to speak with an accountant to see if the accrual method would better fit your business.
4. Understand Your Tax Obligations
You are responsible for making payments for taxes on your business income as a small business owner. Therefore, it is important to understand the different types of taxes you may owe. These include federal income tax, state income tax, sales tax, and payroll tax.
You may also be eligible for certain deductions and credits to lower your tax bill. Speak with an accountant or tax attorney to ensure you are taking advantage of all the tax breaks available to you.
5. Create a Budget
A budget is vital for keeping your small business finances in order. A budget can help you see and track your income and expenses, so you’re aware of how much money you have to work with each month. It can also help you make financial goals and stay on track.
Include your projected sales, marketing expenses, and operating costs in your budget. This will give you a clear picture of your financial situation and help you make informed decisions about where to allocate your resources.
6. Keep Good Financial Records
Good financial records are essential for a healthy small business. First, you need to track your monthly income, expenses, and profit (or loss). It will help you make sound financial decisions and spot any problems early on.
You should also keep records of your assets and liabilities. It includes things like inventory, equipment, and real estate. Knowing the value of your assets can help you get a loan or line of credit if you need one.
7. Hire an Accountant Than Doing It Yourself
There is no shame in admitting that you need help with your small business accounting. Hiring an accountant can save you time and money in the long run. An accountant can help you choose the proper accounting method, understand your tax obligations, and keep good financial records.
Hiring an accountant is an investment in your business. However, you may not be able to afford one if you are just starting. In this case, many do-it-yourself accounting software programs can help you get your finances in order.
The Bottom Line
Small business accounting is essential for keeping track of your finances and making informed decisions about your money. There are many different ways to approach small business accounting, but the most important thing is to find a system that works.
If you are feeling overwhelmed, hire an accountant to help you get your finances in order. An accountant can save you time and even money in the long run.
What tips do you have for small business accounting? Share your thoughts in the comments below!