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7 Tips to Get Your Small Business Accounting Practices in Order

7 Tips to Get Your Small Business Accounting Practices in Order

You’ve recently launched a new business and it’s started to grow. Now is the best moment to get organized and pay some attention to all accounting related issues. Every business owner has to make a detailed to-do list and stick to it at all times. That way, all emerging challenges can be taken care of as soon as possible. Go ahead and keep reading, since it will help you to get insight into all major accounting steps you need to take on your path.

Opening a Bank Account

First of all, you need to legally register your business. Once you’re done with that, make sure to open a separate bank account where you’re going to keep your income. This step can’t be skipped if you registered as your company as an LLC, partnership, or corporation. You’re not legally bound to have an account that is separate from your personal account if you are a sole proprietor, but it’s highly recommended.

Having a business bank account allows you to organize your budget and make a plan for taxes. In addition, you’ll need a new credit card issued, in order to start building business credit. Learn about needed documentation and don’t forget to compare fees. Once you’ve done that, go ahead and choose your bank.

Tracking the Expenses

In order to run a successful and solid business, you’ll need to keep a record of all your expenses. By doing this effectively, you’ll be able to monitor your business’ growth, work on financial statements, keep up with deductible expenses, and get prepared for tax returns.

The best practice is to save all relevant receipts. Pay extra attention to meals and entertainment, business travels, vehicle-related expenses, gift receipts, and office expenses. Keep in mind that even if you conduct business from a home office, you can be eligible for some unique tax breaks, which can be very helpful if you are a small business owner.

Create a Bookkeeping System

It is important to differentiate between bookkeeping and accounting. The first term is related to the everyday process of recording and categorizing transactions, while accounting is a more complicated process that uses the data provided by a bookkeeper by making financial statements. Of course, your business will need both.

There are a lot of options available when it comes to bookkeeping. You can get it done using software or even a simple Excel worksheet. Another way is to find a part-time bookkeeper in your area. If your business is big enough, you can contact the best accounting firm you can find and they’ll take care of everything.

Create a Payroll System

As your small business grows, there will be some tasks you’ll want to assign to other people. Because of that, you’ll need to establish if these people are employees or independent contractors. You’ll need to create a payroll schedule for all employees, including all necessary payroll taxes. If you choose to work with independent contractors, make sure to track how much are you paying to each one of them.

Get Educated About Import Taxes

As your business grows, you’ll probably need to import some goods from foreign countries. All these products will probably be subjected to taxes and duties. The law in your country imposes those fees and you should get well informed about that. Once you learn enough, you’ll know where is your money going and you’ll be able to manage your budget efficiently. If you need some help, feel free to use one of the available duty calculators online that can help you estimate import fees.

Learn About Payment Channels

When your business starts selling, you’ll need to find a way to accept those payments. There are few options available. If you own a store on Shopify, you’ll be able to receive credit card payments via Shopify payments. If you want another option, you should go with a merchant account, or you can work with a third party payment processor. Keep in mind that the third party will charge fees and you’ll need to pay for them after every transaction. Get your numbers straight and choose the option that suits you best.

Re-Evaluate Your Methods All the Time

At the beginning, all you’ll need to keep your books is a simple Excel spreadsheet. As time goes by, and your business starts to grow, you’ll probably need a better solution. Once you see that a spreadsheet isn’t enough and takes a lot of time to maintain, you should consider using one of the online bookkeeping platforms. As your business gets bigger, it is important to constantly reassess the time you spend on bookkeeping to determine if outsourcing your company’s bookkeeping can save the time you need to complete other business related tasks.

Final Thoughts

Once you get well educated about all risks and possibilities regarding accounting, go ahead and get organized. If you don’t have enough time to keep the books yourself, feel free to ask for help. That way, you’ll have much more time to be the real entrepreneur and focus on the aspects of your business that will help you get ahead of the competition.

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by Cate Palmer // Cate is a designer by day and a writer by night. Her fields of expertise are web design and digital marketing. Her interests are, on the other hand, wide and ever-evolving. These days Cate is quite passionate about helping small businesses in all aspects of online marketing. Cate is also one of the editors at Media Gurus.

Opinions expressed by contributors are their own.