If You’re a Business Owner, Keep These Accounting Tips in Mind
You won’t find many small business owners who are eager to get into their financial records and work on accounting. It’s tedious work and it can often seem confusing and overwhelming.
While accounting might not be your favorite part of being your own boss, it is not something you want to put off or avoid. Bookkeeping helps you manage the finances of your business, and it plays an important role in being able to accurately report your income.
Instead of putting off all of your bookkeeping and accounting work until it has to be done, you should try to get ahead of it. When you stay on top of your books, it will be much easier to manage the operations of your business and it will save you a lot of stress when tax time comes around.
Here are a few simple tips that can help small business owners manage their books better:
Track Your Expenses
Expense tracking should be one of your top priorities as a small business owner. Even beyond the large expenses, a few dollars here and there can add up quickly. This will not only help you keep track of your cash flow, but it will also make it easier to maintain your books moving forward.
One way to simplify this process is to use a company credit card for most purchases. If you do happen to use cash for some business expenses, make sure to keep the receipt and record the expense as soon as possible. You could also consider using expense tracking apps to help you keep track of your spending.
Separate Your Finances
Many small business owners start out believing it will be simpler to use their personal bank accounts and credit cards for their business. While it may seem simpler in the beginning, it is going to make things more difficult when it is time to close your books and pay your taxes.
If you want to make it easier on yourself, set up different bank accounts and credit cards for your business. It will not only make tasks like bookkeeping and tax preparation easier, it could also help you to avoid tax penalties.
Consider Using Accounting Software
You can still write your books out by hand and pay your taxes the same way, but accounting software is one of the smartest investments a small business owner can make. It will save you a lot of time when it comes to working on your books, and most of these systems can even streamline many of the processes that go into small business accounting. With many of these systems, you don’t even have to enter much of the information manually; you can link your bank accounts, credit cards, and invoicing to have the software do the work for you.
Keep an Eye on Payroll
Payroll can be one of the highest expenses for a small business. Keep track of the number of hours worked, overtime, benefits, and bonuses. You also want to make sure to stay on top of your obligations as it concerns payroll taxes.
Reporting your inventory and its value is an important part of managing your books. Beyond that, keeping track of your inventory will help you to avoid losses as it relates to theft or items being misplaced.
One method for inventory management is to manually count and record every item by hand. However, using inventory management software is a better option. Many of these systems can help you keep an accurate count of your inventory in real-time. Some of them can even use the data to provide services like inventory forecasting to help you make better decisions in the future.
Schedule Time for Your Books
Maintaining your books should not be something you only do when you happen to find the time. When you leave bookkeeping as an afterthought, it can be very easy for things to get away from you. Instead of just doing the work when you find the time, you should add it as an item on your weekly schedule. By putting a little bit of time into your books every week, you can keep track of your finances and avoid the headaches that come with updating poorly maintained records.
As a final tip, consider hiring professionals to help you with your accounting. Even if you just hire a bookkeeper to come work on your books for a few hours every month, it will go a long way toward keeping your records in order. Hiring an accountant at tax time could also help you find deductions and avoid penalties. These professional services are an expense, but it can be a good investment when it comes to maintaining the finances of your company.
About the Contributor
Rae is a graduate of Tufts University with a combined International Relations and Chinese degree. After spending time living and working abroad in China, she returned to NYC to pursue her career and continue curating quality content. Rae is passionate about travel, food, and writing for Funding Circle.
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