As an owner, you have tons to consider when managing your business. One of the essential things that you have to look into is your accounting practices. You have to track profits, expenses, and revenues efficiently to avoid certain complications getting in your way. By doing this, you get to focus more on what you do best – running and growing your business.
While you can do the bookkeeping yourself in the beginning, what happens if your business starts to grow? You might feel lost, especially when tax time approaches. The consequences of messy bookkeeping and incorrect tax filing can be severe, and correcting these errors can eat up lots of your time.
Before problems arise, consider hiring an accountant. Or, if you can’t find one yet, make use of accounting softwares like Wave that has simple-to-use accounting features.
So you can keep moving forward and improve profits, check out some proven accounting tips for small businesses below.
Open A Bank Account For Your Business
After getting your business registered, open a business bank account. This is where your income goes.
Corporations and LLCs need to separate personal accounts from business finances, and that’s something that you have to follow. If you’re a sole proprietor, you have the option to commingle your business and personal expenses, but that’s still not advisable.
Here are some reasons why you should keep your business and personal finances separated:
- It will not complicate things during tax season. You will not mess up your tax management since there’s no need to untangle business and personal finances if you’ve already placed them in separate accounts.
- Monitoring the progress of your business becomes easier for your accountant or bookkeeper. Once you separate your finances in different accounts, the job of your accountant or bookkeeper gets more accurate. This way, you’ll receive a clear and error-free report of how your business is performing.
Learn To Track Your Expenses
You need to track your expenses, and it’s one of the foundations of a robust small business accounting. Tracking your expenses allows you to build financial statements, prepare tax returns, track your deductible expenses, support your tax return report, and perform business growth monitoring.
Organize your receipts and other essential business records. Pay attention to the following receipts below to track your expenses better.
- Receipts from home office expenses – Calculate home expenses that are related to your business. Costs include business errands, phone expenses, internet connection, and transportation to and from the site of work.
- Receipts from vehicle-related expenses – Keep track of why, when, and where you utilized your vehicle for business-related matters.
- Receipts from business travel expenses – Do you have business activities that you need to carry out away from home or office? Make sure to track the expenses from your travels,
- Receipts from meals – If you’re frequently going out to meet and talk to prospects and clients in restaurants and cafes, track your meal expense as well. You can also take note of the people who attended the meal, whether you’re paying for your team members or clients.
Practically, you should track all expenses connected to your daily business activities.
Perform Day-To-Day Money Management
You have to stay on top of your daily money management. Some of the things that you can do include the following:
- Review business costs – As already mentioned above, it’s essential to keep track of all business expenses. Business costs can quickly add up, so you must review them, and make adjustments or fine-tune the use of your money.
- Have clear financial projections – Making financial projections will help you anticipate possible obstacles in the future so you can address them adequately when they finally happen.
- Take care of invoicing – Invoicing is another essential aspect of your business. Ideally, you have to send out the invoices immediately after providing services or goods. You also need to set payment terms of at most seven days so payments will not get lost in the process. Follow up on each invoice you’ve sent and reference invoice numbers for easier tracking.
Automate The Accounting Practices Of Your Business
Any small business can benefit from an accounting software. You can use it to automate every part of the accounting process in your company. Accounting software also provides secure access to your accountant or bookkeeper, if you’ve hired or are planning to hire one.
The choices for software to help with small business accounting are countless. The software can aid in tracking your expenditures and income, paying and sending invoices for every transaction, and generating financial reports.
Choosing the best accounting software in the market can be daunting. Make sure to look for one that fits all your accounting requirements so you don’t end up wasting your money.
Managing a small business is overwhelming. The accounting aspect makes things a lot more complicated. From opening the right bank account to deciding for an accounting software to automate your accounting processes, make sure to follow the above-mentioned tips so you can effectively work towards the success of your business.