As a business owner, there are thousands of things running through your mind every day. Every entrepreneur is always thinking of new tactics to implement in a bid to make more profits. Most small business owners believe that the last thing they have to worry about is their account management. To some extent, that’s true if you have an accountant employed in that department.
However, that doesn’t mean all the responsibilities regarding your business’s accounting management lie squarely on the accountant. There are some areas you could improve or adjust so as to ensure that your business is running smoothly. The good news is that it takes a few simple steps to take advantage of this strategy. Read through the article to find out more about these tips and how you can implement them in your small business.
1. Separate Your Business From Personal Account
One huge mistake that most people do is using one bank account for both business and private transactions. Well, as a start-up, you can get away with this. But, as your business grows, it can be quite difficult to manage the two transactions in one account. It can be very hectic and time-consuming to peruse through pages of your bank statement, especially when looking for one specific business transaction.
As such, it is important to open a different account dedicated to all your business transactions. This will make it easier for you and your bookkeeper to account for weekly or monthly financial statements of the business. It also brings a feeling of professionalism in the company, which is something that most clients or potential stakeholders look for in their dealings.
2. Distinguish Receivables From Borrowed Funds
Since you are just starting up and your business is yet to generate enough funds, you might need some financial help. Borrowing back-up funds from various institutions are normal as you might spend a lot of money on marketing and other initial activities. However, problems arise when you mix up your income with loans. Inasmuch as it might seem like a simple issue, it can mess up your financial statements, and you might end up falling into trouble with your creditors.
Therefore, to better understand your financial situation, it is important to separate loans and your income from the word go. Of course, you can do this manually, but that won’t be a wise move in this age and era. You can pay for accounting software that will automatically sort out your loans and distinguish them from the income. As such, you’ll have a clear picture of your net income every month.
3. Record Daily Expenses
Most businesses detail their expenses every two weeks, but this is mainly for books. As such, it is quite difficult to plan for the upcoming weeks and months. Keeping a record of the daily outflow of cash from the business will give you an idea as to where to improve. You’ll also be able to come up with a play to keep the business afloat even during tough times.
4. Know Your Deadlines
Taxes and monthly bills are the main deductibles that you should expect every month. However, if you don’t know the exact dates, you could end up having less cash on hand. Imagine setting an automatic bill payment system, then, all the bills being paid at once.
Of course, it is a good thing, but you might not remain with any emergency funds. As such, it is advisable to know all the deadlines of your bill payments to avoid such scenarios. In addition, you’ll also avoid penalty fees that might arise due to late payment.
5. Create Your Budget
One thing that usually leads to failure of start-up businesses is the lack of a purchase plan. There are entrepreneurs who buy new stuff whenever they need them, and not when the pockets allow. It is understandable that you need a lot of tools before you can catch up with your competitors. However, buying these resources without a strategy may force you to close down the business before it even gains momentum.
So, what should your budget entail? For one, it should have all the necessary expenses. Your monthly bills and taxes should be among the priorities. If some cash remains after these allocations, you can go ahead and revamp your business.
Conclusion
Are you an owner of small business and wondering how to manage your account? Well, the first thing for you to do is to make sure that you have separate bank accounts for business and private transactions. Once this is set, you can now focus on the details, like daily expenses, loans, and budgets. These are very crucial factors for ensuring that your business remains operational throughout the year.
