Accounting is usually a dreaded task for most small business owners. It’s one of those back-office tasks that never cross your mind when you decide to run your own business, and yet it sucks up your day and makes running a successful business that much harder. But there’s hope, and it starts with getting organized.
Here are a few tips to help business owners trying to tackle their accounting:
1.Keep it separate – To avoid things getting messy and complicated separate your personal and business accounts. By keeping separate bank and credit card accounts for business and personal, you’ll save yourself hours of work and make it easy to keep track of deductible expenses in one place.
Separate your personal and business bank accounts. It’s easy to lose track of your cash reserves and keep funding your business expenses from your personal account. Pay your business expenses from a dedicated-for-business credit card with a fixed credit limit. This gives you the flexibility and control to plan your cash in-flows in order to meet your cash-outflow.
2.Budget your spending – The best way to run your small business is to know how much money you need to make in order to break even and how much you have to spend to run your business on a daily basis. The key to financial discipline is realistic balancing of needs versus wants.
3.Consider HR costs – When you’re looking for insights into your businesses spending, don’t forget to properly track what is likely one of your biggest expenses: labour. Whether you’re paying a full staff or you’re the only one on the payroll, make sure you’re tracking the costs of wages, benefits, overtime and any other costs associated with labour. By tracking your spending on labour, perks and benefits, you may find you have more money to incentivize your employees — or that you’re outspending your budget. Either way, doing the calculations now can help you make better decisions later.
4.Schedule time – Set aside about 15 minutes every week to organize your finances, and don’t let other things take priority during this time. You’ll have more insights into your business, be able to make more informed financial decisions and have everything organized when tax time approaches. Something always feels more pressing than your finances. But when you find the time every week, you’ll feel your stress levels — now and at year-end — fall fast.
5.Don’t Spend, invest. – Spend your hard-earned money on things that will reap long-term benefits. Every expense has two faces: current benefits and long-term benefits. Businesses that spend on a long-term investment nature reap its benefits much longer. But remember to balance the cost versus the benefit. If your expense doesn’t directly help you in increasing your business or quality of your work, don’t spend on it.
6.Maintain Records – Keep all receipts, organized, in a safe place where you will be able to find them when you need them.
7.Be lean and efficient – A business has two types of costs – fixed costs and variable costs. Fixed costs are like body fat. You have to bear the weight whether you make money or not. Instead of buying expensive, proprietary software, try working with free and open source software. Try Skype meetings instead of travelling long distance. Maybe try even bartering for much-needed services with professionals (for example, help an accountant with their marketing material in exchange for a free tax return, etc.). Be lean without diminishing customer satisfaction.
8.Don’t forget to get paid – This one seems pretty obvious, but you would be shocked at how many small business owners don’t properly track invoices and customer payments. If you’re not keeping proper records that you can make sense of at a glance, it could be months before you realize you have outstanding invoices. You could be collecting payments late, or missing some altogether. Make sure you’re properly tracking all payments due and recording when each invoice is paid, how long customers generally take to pay, and which customers you’ve had difficulties collecting payments from in the past.
9.Hire an expert – Get an account. Their intimate knowledge of the profession as well as tax laws will save you money almost every time. It can be tempting to save some money and do it yourself, but it’s almost never more cost-efficient in the end. An accountant will be able to guide you and keep you penalty-free. When things get technical or taxes are due, save yourself the money, time and headache and call in a trusted professional.
These are just a few basic tips that we hope will inspire you to take on the task of accounting and get organised