Accounting is not most entrepreneurs’ favorite part of running their own business. In fact, doing the books will fill many small business owners with dread. But it’s crucial to keep focused on the money to make sure your company stays afloat.
It’s not just about tax – although it’s important not to miss tax submission deadlines to avoid penalties. Monitoring your day-to-day income and expenses can aid you in planning for the future.
There are some simple strategies you can adopt to make your accounting a lot easier. Follow these five small business accounting tips to help your business to flourish and to take away the stress of doing your books once and for all.
1. Keep Your Personal Finances Separate
It’s a good idea to have a separate business bank account, no matter how small your operation is. This makes it easier to monitor business income and expenses.
Within your business accounts, it’s helpful to keep any borrowed funds for investment separate from accounts receivable. You need to keep track of what you owe and not get it mixed up with any funds from income.
2. Keep Track of Daily Expenses
Keeping a good record of your daily business expenses will help you plan for the future and project your profit after costs. You should keep all your receipts and develop a system for organizing them into categories.
It’s better to do this as you go along. The last thing you want is a huge pile of random receipts to go through when the tax deadline is approaching.
3. Plan for Your Taxes
It’s crucial to get to grips with the tax regime you’re subject to. You need to know enough about the system to estimate what you’re going to have to pay. Do your research so that you can budget for your tax.
It makes sense to set aside a portion of your income each month for your taxes. Otherwise, you could end up with a big problem when it comes to paying your tax bill. You should also set yourself reminders in the lead up to the tax deadline so that you don’t get penalized.
4. Prepare Profit and Loss Statements
A profit and loss statement is the best way to gain a quick overview of the financial health of your business. It shows all your expenses, costs, and income, which then shows the company’s overall profitability. This in turn makes it easier to calculate tax liabilities.
5. Hire a Professional
If this all sounds a bit too much, and you’d rather focus on the creative aspects of your business, it’s worth employing a professional to help with the financial side of running your business.
You might decide to hire a part-time employee or a freelancer to handle the books for you. Another option to consider is whether virtual accounting solutions could solve your problems.
Accounting Tips for Small Businesses
By following a few easy accounting tips and tricks, you can make managing the finances of your small business a whole lot easier. Keeping accurate records and managing your income and expenses properly means you shouldn’t have any nasty surprises.
By dedicating a little time and energy to your business finances, or outsourcing this to someone else, you should be able to free up more headspace for the more enjoyable aspects of running a business. For more great content to help you achieve business success, make sure you check out the rest of the blog.