You may not believe me, but you will think differently about accounting after reading this.
While the word “accounting” may strike fear into the hearts of some small business owners, keeping things in perspective can help. There are many ways to minimize the so-called “pain” associated with this part of running a business. After all, good accounting is crucial to success. Here are five accounting tips for your small business.
#1 – Keep home and business separate.
It is tempting to grab your business credit card for personal items, especially if your personal account is a little low on funds. Try and resist. Buying something on the spur of the moment means that you might forget about paying your business back once you get home. Plus, how are you going to record that purchase in your accounting software? There is potential for things to get very messy. Mixing things up also creates a lot more work for you when the time comes to sort it out.
#2 – Get a professional.
Accountants have always been important to small business owners. They know the business inside and out. And, they also know the tax laws and can tell you all the accounting tips there are. There are many ways you can save money in your business. One of them if paying for the expert advice of a CPA. In addition to working with an accounting professional, you also need an accounting software. I like Freshbooks, and I heard great things about Xero. It is worth the money to have a reliable accounting software. Keep excellent, clean records that you can pass on to your accountant and tax time will be a breeze.
#3 – Make a date with your finances.
Even if you hate accounting, dealing with the books must become part of your routine. Scheduling a weekly check-in with your finances is an excellent way to stay on top of things. Spend 15 minutes with a pen, paper, and your computer, and you will gain a lot of insight into your own business. You will become more organized because you will be more on top of things. Better organization means that you will have just the right stuff to hand over to your accountant come tax time. What a relief that will be!
#4 – Consider labor.
Whether it’s just you or a large group of employees, labor is one of your most significant expenses. It’s not as easy as counting billable hours. There are overtime hours and benefits for staff and other odd expenses that you might include, such as the Christmas party. Once you get a good picture of what is coming in and going out, you might find out two things. You might find you have extra money freed up, or you might see you are overspending. Either way, it is essential to track the numbers associated with labor.
#5 – Remember to get paid.
It’s surprisingly common for a service provider to get the job done, invoice the client, and then forget to follow up. You could carry on working for a long time before you realize that you haven’t been paid. It is essential to track all invoices and have systems in place for a follow-up. Not only do you need to know if you’ve been paid, but also when. It’s useful to look at the length of time it takes for a client to pay up. If one of your clients is consistently late with payments, it might be time to let them go. As you can see, tracking invoices well can give you valuable insights. In our business, we use Freshbooks to invoice our clients.
Hopefully, these five accounting tips have opened your eyes to a few things. It’s so important to keep on top of your finances and, with a focused effort, it doesn’t have to be painful at all.