If there’s one thing that stresses small business owners out, it’s accounting. But the irony is that accounting is actually very simple…when it’s done properly. If you can simplify your approach and develop the right system for your business, accounting will no longer be a pain in your side.
The Importance of Getting Accounting Right
There are things that get business owners excited. Marketing, branding, sales, and even certain parts of the manufacturing process can get the juices flowing. Accounting, however, is not one of them. Despite this, it’s one of the most important elements of running a successful business.
Accounting helps you track income and expenses, so that you have a clear understanding of where things stand at any given moment. It also helps evaluate the overall performance of the business and make smart projections about where things are headed over the next 12 months.
From a regulatory standpoint, accounting ensures statutory compliance. It makes sure you’re paying all taxes properly and keeping your finances organized accordingly.
The list goes on and on. Accounting plays a critical role in keeping your business legal, profitable, and productive. If you want your business to grow, you need to take this aspect of your operations seriously.
5 Tips for Better Accounting
You don’t have to make some massive, sweeping change to your accounting. In most cases, shoring up a few deficiencies and improving specific problem areas can lead to positive growth. Here are a few useful suggestions:
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Keep Everything Separate
If you’re mixing personal and business expenses, you’re asking for trouble. This is pretty basic advice, but we still need to say it. (A surprisingly high number of small business owners make this mistake).
Business and personal expenses must be kept separate. If you have an LLC, this is actually a requirement. (Any commingling will pierce the corporate veil and leave you unprotected.) But even if you’re running your company as a sole proprietor, keeping things separate makes it easier to track expenses, take advantage of deductions, and make accurate financial projections.
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Move Accounting to the Cloud
There’s no sense in using traditional software-based accounting or paper books. We’re living in 2021, which means you need to take full advantage of the resources that are out there. This includes cloud accounting software.
With cloud accounting, all data is hosted in the cloud (as opposed to a specific device or server). This provides better security and remote accessibility. It also gives you total scalability, which means your accounting system grows with you.
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Hire Help
Having good cloud accounting software makes accounting a breeze. Help should always be welcome, especially when it comes to your company’s finances. Don’t be afraid to reach out so all your calculations are correct and precise. However, as your company grows, so will the accounting demands. At some point, you may find it helpful to hire an accounting professional. They can operate your software and provide weekly reports on what’s happening in different areas of the business. It’s also smart to hire a CPA to handle your annual tax filings. The right person could potentially save you thousands of dollars per year by helping you optimize costs, deductions, credits, etc.
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Don’t Wait
One of the trickiest aspects of accounting is recording expenses. And if you don’t make a habit out of recording expenses right away, it’s easy to lose track of the expense and/or forget about it. This can hurt your bottom line and prevent you from being able to take full advantage of things like deductions and credits. To make recording expenses easy, you can download an expense app that lets you take a picture of the receipt and quickly file it away in the appropriate place.
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Do a Quarterly Review
In addition to tracking your accounting on a daily and weekly basis, it’s a good idea to sit down for a quarterly review four times per year. This is where you take a detailed look at your accounting records and bookkeeping. Be on the lookout for emerging trends (like declining sales or a rise in the number of late-paying customers). Based on these insights, you can implement new rules or processes to keep your company moving in the right direction.
Set Your Business Up for Success
Accounting is no small thing. If you’re going to run a successful business that withstands the test of time, you must have your numbers in order. By improving your approach to small business accounting today, you can pave the way for growth tomorrow.
