Managing business finances isn’t easy. Studies show that 60% of small business owners don’t have the knowledge needed to keep up their business finances. However, that doesn’t mean that there aren’t simple tips that you can learn to help the process.
If you’re looking for accounting tips that will help you keep up on your books, this post will help. Below are seven small business accounting tips that every company needs to know.
Separate Your Business and Personal Accounts
Joint bank accounts are one of the most common accounting issues new businesses have. New business owners can get impatient and want to start their operations straight away. Because of this, they run everything out of their personal checking account and credit cards.
While you can get away with doing this for a while, it will eventually cause problems. One of the most significant issues it will cause is when you need to pay taxes.
If you have business expenses, you’ll need to determine what expenses in your personal account are business expenses and which ones are personal. This process is challenging and time-consuming. It’s much easier and more time-effective to take a little time in the beginning to create separate financial accounts for your business.
Remember Tax Deadlines
Paying taxes on business income isn’t like regular income taxes. You don’t only pay once per year and get a big refund. You’ll have more work to do when you run a business.
The IRS wants businesses to pay taxes quarterly. Unfortunately, this isn’t on your earned income for each quarter. These are estimated taxes, and you’ll need to predict your cash flow to figure out how much to pay.
You can face penalties if you don’t meet your quarterly filing obligations. If you want to keep the cash coming into your business and not out of it, make sure to meet those deadlines. You can always get a refund the following year for any amount you overpay.
Track Every Expense
Many business owners don’t have issues tracking large expenses. These purchases put a big dent in the bank account. Because of that, these purchases get analyzed with care.
The same isn’t always true for more minor expenses. People underestimate the impact of a lot of small purchases in a short amount of time. If you aren’t careful, you’ll end up using your whole budget on small items your business may not need.
That’s why it’s critical to track every business expense, no matter how small. Keep track of everything your company buys and analyze what’s needed.
Keep Money in Savings
It’s easy to overspend when you’re first starting a business. You want things to grow as fast as possible, so you reinvest all your revenue into continued growth.
Unfortunately, this doesn’t always work out well.
Even if your growth efforts are successful, you never know when you’ll face an unexpected setback in business. While some of these you can easily deal with without cash, others will require money to resolve.
This is a problem if you have no money in the bank. Make sure you keep enough cash for unexpected expenses to ensure you can keep your company running.
Create a Financial Plan
You can only get so far by winging it in business. While you may be able to survive for a while, you’ll eventually face roadblocks that you can’t break.
One of the biggest roadblocks businesses face is a lack of money. They don’t have a plan to maximize profits, maintain savings, or invest in the future.
That’s where financial planning helps. Come up with short-term and long-term goals for your company’s finances. Once you have those goals, you can create a plan to meet those numbers.
When you create a goal and a plan to work towards it, you’ll be able to better drive your company towards success.
Automate Everything You Can
You only have so much time in the day as a business owner. While you may be able to handle all the small details yourself or with a small staff, that won’t always be true in the future. As time goes on, you’ll need to do everything you can to make your business more efficient.
That’s where automation helps. You can find automation tools that help in every part of business finance. Here are a few financial automation functions you can take advantage of:
- Transaction categorization
- Invoice tracking
- Managed payroll
- Budget breakdowns
- Automated alerts
The more you can automate these small tasks, the less you have to worry about your finances. You can run a large company with a minimal small business bookkeeping team if you give them the tools to do the job.
Get a Financial Audits
Maintaining outstanding records and having a great team can get you far with your business finances. However, people can get tunnel vision when they work on something for so long. You may end up missing important details because everything looks the same as it always did.
That’s why getting an occasional financial audit helps. You’ll hire a third-part financial firm to audit your financial records if you go down this route. They’ll look for holes in your records doing this process.
Once the financial firm completes its audit, they’ll fill you in on things you can improve. From there, you can handle things yourself or continue working with your provider to fix any issues.
There Are More Accounting Tips for Small Businesses Out There
You can’t afford to have bad books when you run a small business. You need every penny accounted for and a plan to keep the cash flow coming into your business. Following the accounting tips above will help you accomplish that task and set your company up for success.
Of course, keeping your books in the black is only a small part of running a successful company. Keep reading the blog to learn more business tips that will help.