Having your own business is hard work. It doesn’t end with idea generation or operations management. You also have to know how to work around the financials and accounting of your business for it to be a success.
More often than not, accounting is one of the challenges you need to hurdle or top concerns you need to pay attention to when you’re an entrepreneur or managing a small business. Accounting is one of the foundations of every business. This is also the oil that gives fuel to your engines as a business, which is why it’s important to manage it well.
Here are some tips on how to manage your business accounting better.
1. Separate Personal and Business Expenses
Most especially for small businesses or sole proprietorships, it’s a common mistake to mix personal and business expenses in your accounting. As a rule of thumb, personal expenses should not be charged to the company.
Following that logic, you also need to keep loans and liabilities separate also. By having an accountant, you can organize your expenses and liabilities better.
2. Hire an Accountant and Use an Accounting Software
If you’re just starting out, it’s imminent that you hire an accountant to put your accounting records straight. An accountant will be knowledgeable on how to arrange your ledgers and organize your accounts. They also know the technicalities when it comes to taxation and such that’ll help you a ton. That’s why it is also important to hire a good accountant whom you trust.
To be even more efficient, it’s also great if you can also invest in accounting software, such as Wave. Doing so will save you a lot of time since the accounting software has algorithms that’ll automate processing of accounts and organizing your financials.
3. Learn Accounting Yourself
Aside from hiring an accountant or using an accounting software, you also need to learn basic accounting as well. You can try learning by taking basic accounting classes either online or at a center.
It’s a must that you also know the ins and outs of accounting so that you won’t need to rely solely on your accountant. Understand key terms in accounting, such as the following. in order to understand what your accountant is telling you:
- Balance Sheet – A balance sheet contains a list of your assets, liabilities, and equity. This is usually used to give you a snapshot of what your company is worth. The essence of a balance sheet means that your total assets must be equal to the sum of your liabilities plus your equity.
- Cash Flow Statement – A cash flow statement is very important for your business because it’ll tell you about the financial health of the company. Your cash flow statement will track the outflow and inflow of cash depending on the activities in your business.
- Income Statement – Your income statement will show you how much revenue you’re making and how much income you’re earning. This will be important when you need to determine your breakeven point.
In addition, learning the basics of accounting will help a lot when you make big decisions regarding your company. Having a background in accounting will give you a more holistic perspective when you try to understand how certain actions affect your company. Because of this, you can make better decisions.
4. Monitor Your Finances
From time to time, you need to make it a habit to check your finances and accounting regularly. Monitor your cash flows and how you’re performing financially. Keep your financial and leverage ratios in check.
By doing this, you can quickly assess how well or bad your finances are. Then, you can be more proactive in making changes in your company to address the bad side of your finances.
5. Pay Your Taxes on Time
When it comes to a business, there are many kinds of taxes that you need to pay. These include income tax, excise tax, state tax, real estate tax, documentary tax, customs tax, and legal tax. You need to research on the deadlines and computations since it’s different for each kind of tax.
In addition, you also need to pay these taxes on time because your company will incur penalties if these taxes are not paid on time, which will make a big lump on your finances.
Conclusion
One thing’s for sure, you need to put in more effort in managing your business accounting better. Armed with the tips and guide above, you’ll be able to do improvements on how you manage your finances and accounting. When you apply these tips, you’ll see big changes in your business for the better.
