We can all agree that few business owners love poring over spreadsheets. Business books are a scorecard of how well you’re doing. If you’re not a “numbers person,” then doing bookkeeping and accounting at large may not be appealing. That said, regardless of how you feel about accounting tasks, they’re essential in business.
Regardless of the size and nature of your business, you need to be hands-on with its accounting functions. This is an important facet that affects the longevity and success of your business. If your books contain accurate records of your business’s finances, you will have better chances of succeeding in the industry as you’ll have a bigger picture of the overall health of your business. Keeping up-to-date books will also make it very easy for you to determine problems and come up with solutions in the soonest time possible.
Managing your business’s accounting can be tough, but there are many ways you can do it. To make the process easier for you, let’s go through five useful accounting tips for your small business.
Separate Your Personal and Business Finances
Having a dedicated business bank account saves you the effort of tallying up the deductible business expenses. Out of the gate, you must make the habit of using different bank accounts for business and personal purchases. And if, for instance, you’re contributing capital to your business out of your assets, always ensure you document the contribution.
Maintaining different accounts for both business and personal finances will also help in limiting the legal exposure that you may accrue in your business if you have a corporation or limited liability company. In general, you can’t deduct personal expenses on a business tax return. Having a separate account makes it easier for the entrepreneur to stay more organized and improve efficiency since less effort is required to find the right transactions.
If you’re leaning towards this direction, start looking for business bank account providers like Monzo. These service providers understand your needs as a business owner and offer services that will make it very easy for you to keep track of both your business and personal accounts.
Track Every Expense
To maximize tax write-offs and credits, it crucial that you categorize and label each expense while tracking your cash flow. Remember that dollars can add up pretty quickly, and so it’s easy for you to run out of money. Therefore, always use your business credit card for all purchases. This way, you won’t end up with a wallet full of paper receipts. By using a credit card, you’re likely to earn rewards and cash backs for your spending. At the same time, if you’re using accounting software, it will store the copies of checks and invoices paid.
Keep Your Records Neat and Tidy
To some, a bit of clutter is always welcome; if you’re like me, you know that untidiness isn’t at the top of our priorities. Now, while this works great for personal life, it doesn’t work in the accounting field. Here, it’s always a good idea to keep everything in good shape, especially the accounting books. This saves you time and effort when looking for them. Having organized financial records also means that you improve your accounting efficiency and won’t succumb to sneaky tax deadlines.
Keeping your records neat and tidy will also make it very easy for you to access important data whenever you need to. This is especially important if you plan on expanding your business with shareholders in the future. Aside from these, the data you can easily access from an organized accounting process will help you formulate sound decisions. If you don’t have any idea how to budget your business’s marketing campaign, you can easily gather financial records from your accounting and assess if the funds you spent on marketing in the past provided you with positive results.
Stick to Tax Deadlines
Speaking of tax deadlines, it’s always a good idea to stick to the tax deadlines. A looming tax deadline is quite stressful, and this is particularly true if you are rushing last minute. It becomes easy to make financial mistakes that might have far-reaching consequences. As such, it’s always crucial that you note down the tax deadline and set a reminder that will give you ample time to fill your returns without making any mistakes.
Decide on Using an Accounting Firm
Understandably, many entrepreneurs may be feeling like they are ready to act as accountants, sale managers, and marketers, primarily to cut the costs. However, it will help to hire an accounting firm, especially if you’re not good at numbers. Treetops Chartered Accountants, for instance, will ensure that you’re not racking up the errors. Accounting firms have a deeper understanding of the workings behind accounting books. They’re likely to guide your business in the right direction with ease.
Outsourcing accounting tasks might seem a bit expensive at first. However, if you’re determined to take your business to new heights, then it’s a worthy investment.
When outsourcing an accounting firm, spend some time carefully looking at your options. If you’re hiring the firm for the first time, ask for recommendations from people who worked with these firms in the past. Make sure that you only work with an experienced, licensed, and insured accounting firm. Remember, you will be spending money on their services, so make sure that you end up working with a firm that’s worth every single dollar!
Thanks for sharing these amazing tips. The life of a businessman is already jam-packed with employment and other responsibilities, so completing your books yourself is probably the last thing on your mind.
Also, any company-related purchase receipts should be kept so that you can claim any business costs. It all depends on the sort of business you have; for example, if you operate from home, you may be able to claim back certain household expenses.
Anything from stamps to stationery can be used. Keep track of any company purchases or costs and put them in the orderly records we described previously.