Being an entrepreneur is not a small feat and it comes with several responsibilities. You can feel confident about managing the business finances using the right tools that make your job easier. As a business owner, it is important to be aware of the amount of money you are making and where it is going. It will help make accurate decisions while you focus on growing the business. No matter the industry you operate in or the type of business you own, it is important to maintain appropriate books of accounts at all times.
Here are a few tips to help you excel at small business accounting.
1. Look for accounting software that works for your business
There are several accounting software programs available for you. Choose one that fits your needs. Decide how you will use it and the features you will need. Then consider the number of users and its cost. Depending on your requirement, choose software that fulfills your needs. If you want to do payroll in-house, you need software that meets your business type. If you have a business with a high inventory, you need a software program that enables inventory tracking. Consider the number of employees that will use the program. You need a program that can be easily integrated into the software and the applications that you use.
2. Decide an accounting method
The professional experts at CPA firms in Northern Virginia state, “There are two types of primary methods of accounting you can choose from. One is accrual, and the other is cash-based. The cash-based method is simple to use, but not suitable for every type of business.” It can be used by businesses where no inventory is involved. But businesses with over $25 million in revenue cannot use this method, and it only gives a short-term look at the financial health of your company. On the other hand, the accrual method of accounting will give a broader financial picture.
3. Record and maintain track of every expens
Business owners are responsible for recording every expense paid from the business account. Irrespective of the type of payment method you use, the transaction should be recorded with the amount, purpose, and date. You can choose to do it daily, weekly, or fortnightly.
4. Have a bookkeeping schedule
To keep track of the financial health of your business, you need to have an organized system in place. It will help you stay aware of where you stand weekly and monthly. Include the amount you pay vendors, record the weekly revenue, and make the scheduled bank deposits. You should also remember to reconcile the monthly bank statements. Based on this, you can create financial reports at the end of every month. When using software, the report can be automatically generated and if you have a staff member preparing the reports for you, review the same for accuracy. When paying employee or sales tax, you need to prepare quarterly reports for remitting the payments to the IRS.
5. Make sure that the accounting methods pay the invoices on time
When you choose to use accounting software, it can make invoice and bill payments easier for you. Although most software programs will provide options for automatic bill paying and transfer, you still need to ensure that the invoices are paid on time. You can set a time every month to make the payments and keep a check on it.
6. Ensure that the business and personal expenses are separate
Irrespective of the size of the business you have, one of the first steps is to open a business checking account. You should not merge the business and personal funds. Look for different banks so that all your income and expenses are separate, and it eliminates any confusion.
7. Maintain a filling system
You will keep the files on your computer but some documents should be maintained physically as well. When you store the computer files, you need to ensure that there is a backup so that there are two versions of the same document in case one gets corrupted. If you are maintaining physical files, look for a filing system that will give you quick access to the information you seek. Label the files so that they can be easily accessible.
8. Adopt new technology
Technology will help streamline your business and bookkeeping practices. You need to integrate the latest communication systems in the business to communicate easily and efficiently with the clients and the employees. It will save on costs and increase business efficiency.
Keep these tips in mind as you streamline the finances to give your business a strong chance of succeeding. If you need help, hire a professional to handle the bookkeeping for you or use the available software and tools to manage the finances of your thriving business.