Benjamin Franklin once wrote, “In this world nothing can be said to be certain, except death and taxes.” And to that, many a small business owner can add accounting.
As a small business owner, you naturally want to spend your time making your product or service the best it can be, not crunching numbers. The problem is that if you don’t spend some time balancing your expenses with your income and keeping your records in good order, your business can get into financial trouble in a hurry.
The good news is that you can develop a simple system for handling your accounting needs. By following these strategies and setting aside some time each week or each month, you can not only stay on top of your books, but you can save your company some hard-earned cash.
Get the Latest Technology
New accounting apps and cloud-based software can make your accounting easier and more streamlined than ever. Most systems offer free trials for you to learn what will work for your business. Here are some of the advantages of dropping your old methods and getting new cloud-based software:
- Bank transactions are automatically imported, giving you an up-to-the-minute look at your cash flow.
- You can view your account balances, invoices, bills and expenses at a glance.
- You can access your data from any mobile device or computer with an internet connection. (So can your accountant, if you have one.)
- Maintenance and updates occur automatically. No more time-consuming installations or purchasing new versions every few years.
Keep Separate Business and Personal Accounts
Even if your business is just starting out, it is worth it to keep your charge accounts and bank accounts as independent as possible. You will save yourself time and worry in the long run.
Organize Your Business Receipts
Instead of just stuffing your receipts in a drawer and then having a mess when you need to find something, set up an organized filing system for your business receipts. The type of system you use depends on your personal preference. It can be as simple as an old-school accordion file with a slot for each month or as tech-savvy as an app that lets you photograph each receipt for easy paperless filing.
Remember receipts don’t just include expenses. Be sure to keep detailed receipts for any donations or contributions you make to charities or nonprofit organizations for proper records for deductions at tax time.
Maintain Accurate Invoices
Sure you want to get paid, but invoices also are a means of tracking your services or sales. If any questions come up about dates or amounts of service or product, you can check your invoices to easily find the answer.
On a related note, use your accounting software to help keep your accounts receivable payments separate from any borrowed funds.
Stay on Top of Taxes
Collect all applicable taxes at the time of sale or at the time payroll is generated. By applying this rule, you will avoid the problem of having to pay one lump tax sum at year’s end and you will avoid any penalties for delayed tax payments.
Track All Labor Costs
Whether you have a staff or you are a one-man or one-woman show, log all labor costs, including wages, benefits and overtime. Doing this routine math will help you make better business decisions over the long term.
This may sound overly simplistic, but it is key to a successful small business. If you don’t take the time to regularly track your invoices and their payments, you could be missing some income. Set clear payment terms with clients and then don’t allow them to skip payments. Withhold service until the bill has been paid if necessary. Keeping your receivables current is a crucial part of a successful business.
You can have a great product, a great staff and a great location, but if you don’t know what is going on with your financial numbers, you are basically flying blind. Even if you hire an outside accountant, that person can only work with the numbers you provide and does not know your business inside out as you do.
It may be too late for 2014 tax time, but putting these steps into place now will make for a smoother and more profitable 2015 for your small business.