Accounting and bookkeeping are necessary inconveniences for every business owner. When you are running a small business, you have to focus on accounting as your business will suffer if you don’t. Small business junkyard is full of stories of businesses that were actually making sales, but folded because the owners didn’t have a handle on their books. So, like it or not, you have to do your books.
When doing so, you can get away with keeping your books on your own with a collection of spreadsheets in the beginning, but that will quickly become a very unwieldy operation that could threaten your very business. It is therefore important that you set up accounting in a good tool so you can maintain good records, and are positioned for tax time or when your business finally starts to grow.
So if you want to keep moving toward long-term goals and boost up your business’s profitability, follow these proven accounting tips for small business owners.
1. Separate Business and Personal Finance
Do you know what is the most common mistake in small business bookkeeping? Co-mingling expenses and income! It can cause huge headaches in the future for your business, not to mention the possibility of troubles with the IRS. We do not want to mess with the IRS. So keep ’em separated.
If you don’t want your loans to appear in receivables, open a separate business bank account as soon as you decide to go through with your startup. Once you’ve done that, record all your business transactions separately. It’s also a good idea to dedicate one credit card for business only. That way you won’t have to parse through your statements come tax time.
2. Automate Whatever You Can
A small business owner wears multiple hats. There’s not enough time in the day to complete all the tasks needed to run a business. Fortunately technology has come a long way to help you automate most of your tasks. Use automation wherever you can. Using technology doesn’t just help you save money. It also helps you become error free. You may make mistakes in adding up receipts, but an accounting software won’t. Well, a good one shouldn’t. So set aside some time to automate your business. Do your research. Find good tools that you think can help you, and use them.
Many times small business owners say they don’t have time to set up the tools to help them automate. In this case it’s even more important to automate, because if you are already short on time, then you certainly can’t afford to be spending it doing tasks that can be automated, or fixing mistakes that a software app wouldn’t make. So set aside a little time. It will be one of the best investments you’ll make in your business, and in yourself.
When selecting a tool, make sure it’s cloud based so you don’t have to install software, are not limited to a single device and can access it from anywhere. Also make sure it is compatible with other tools or functions you use within your business.
For accounting may we suggest our Wrkmash accounting tool? 🙂
It is robust, feature rich and cloud based. It also connects with point of sale and online store so all your transactions are automatically entered into accounting so you don’t have to. Give it a try. We think you’ll like it.
3. Keep a Close Eye on Accounts Receivables
Receivables are literally the lifeblood of every business. Many businesses perish because they don’t collect outstanding receivables. It might look good seeing a huge amount in the receivable column but money doesn’t count until it is in your bank account. Always be mindful of that and you will have a flourishing business.
Asking for payment is very reasonable and is necessary for your business’ survival. Many accounting apps will let you set reminders so your clients can get email reminders after a certain number of days. You can use that feature to ensure timely payments.
4. Keep Records of Everyday Expenses
These expenses, if not watched, can quickly get out of hand. Keep an eye on them, and a record of them.
5. Create a Profit and Loss Statement
Another crucial step in ensuring the survival and then success of your business is to create a profit and loss statement. Tracking and reviewing your income and expenses can help you assess the health of your business and plan for future growth.
Again, if you’ve set up your accounts properly and have been using the proper accounting tools this is very easy to create. All accounting apps have simple reports that can be run by a single click that will give you that information in a few seconds. So it’s important to set up your accounts properly.
These tips can help you set a good foundation for your business’ management. The sooner you get in the habit of maintaining your books well the better chance you will give your business to succeed.
We at Wrkmash have built a platform that can help you do that. Feel free to check out our services to see how they can help you. You can get started for free.