As a business owner, you might have a life that is already so full of work and other activities that the last thing you probably need is to do your books yourself.
Believe it or not, there are some steps you can take right now that are both simple and can set your business up for success.
Here are some essential small business accounting tips to keep your books nice and neat at all times.
Keep Accurate Records
Most daily accounting information can be easily tracked online with a credit card and bank records. However, it’s essential to keep all of this information in one place so you can view it quickly.
There are software products that may take care of your books for you. And a large number of business owners invest in such software to make bookkeeping easier. With time, such investments prove themselves. To find the most suitable solution for you and your business, you may compare virtual services.
Keep Your Personal And Business Finances Separate
Instead of having your income and other funds thrown into a personal account, being a business owner means that some business finances will combine with your funds.
Most people do not want to search through every shopping list or personal transaction to find that particular piece of business. To keep it all hassle-free, take the simple step of opening a new bank account for all your business stuff.
If you are a solopreneur or independent contractor, you are probably responsible for everything, including accounting. To avoid confusion during tax season, open a separate bank account for your business.
Consider getting a separate credit card for business expenses. It should help you keep track of business-related expenses and separate them from your personal finances.
Budget For Tax
Even though you may be rolling in a lot of money and making a profit, not all the money is yours, as you will need to pay the taxman. You should budget for this and not be too shaken up at the end of the year.
If you have a savings account or something similar, set a little bit of your income aside so you can quickly pay off your tax bill without any worries and enjoy the rest of your profits.
Get To Grips With Tax Rules
When it comes to taxes, it is essential to know exactly which ones apply to you and your business to know what types of taxes you will have to pay.
Income tax, National Insurance, corporate tax, VAT, and business rates – research them all, so you know what you need to pay.
Remember And Stick To Tax Deadlines
Speaking of those sneaky tax deadlines, anything that helps you remember when the tax deadline approaches, do it: phone reminders, countdowns – anything.
The looming tax deadline can be pretty stressful, especially if you are in a hurry because you forgot, and any mistakes you made can take longer to process.
It is a pretty simple step. Write down your tax deadline and set a reminder in advance to have enough time to fill out your tax returns without errors, and the rest is a breeze.
Tax authorities won’t be on your case, your records will be accurate, and you can forget about it until the next deadline.
Learn How To Invoice Accurately
For most new business owners, billing is an unfamiliar concept, but they need to record specific details on various transactions.
They also push customers to pay on time. An accurate invoice can help you keep track of customers who consistently fail to pay on the agreed-upon due date and can help you stay organized.
You should never add to an invoice after it is complete and never create multiple versions of the same invoice.
Making changes to an invoice after being sent to a client will confuse you, your clients, and your accountant. Also, it can make the accounts receivable process chaotic and inefficient.
Keep All Of Your Receipts
There is no need to keep and file every receipt following every purchase but keeping any purchase receipts associated with the business so you can claim any business expenses.
It all depends on the type of business you are in, if you work from home, you can claim back some household bills, for example.
It could be anything from stamps to office supplies. Keep all business-related purchases or expenses and keep them in those neat and tidy records we mentioned earlier.
Follow Up On Accounts Receivables
Accounts receivables is the money that a business is owed from its customers for goods or services provided to them. It helps keep your business running.
Untimely and unpaid invoices can affect your cash flow. Also, the longer it takes to send an invoice, the less likely your payment will be sent.
Create a solid internal structure to control your accounts receivables. Pick a day to process and send invoices and another date to check old accounts receivable invoices.
Extend credit in moderation if necessary, and make sure everything is documented to pursue payment through a collection agency or court.
Create Profit And Loss Statements
Profit and loss statements should give you a snapshot of the financial health of your business. A profit and loss statement summarizes your business’s expenses, costs, and revenues on certain dates.
It can reveal pertinent information about your company’s ability to generate profits and is also commonly referred to as an income statement, income statement, or operations statement.
Before you prepare a profit and loss statement, you will need to gather the following:
- Cash receipts accompany the Petty cash transactions and all other activities.
- Records of all purchases made with business cards and a checking account.
- Information on returns, rebates, and any price discounts you have offered to customers.
- Any source of income, including credit card payments, checks, and cash paid to your business.
For each item listed above, enter the information for the year, as well as the amount for the quarter. Then you should follow the process of creating your profit and loss income statement.
Use A Digital App
Nowadays, there is an application for almost everything, so it should be no surprise that you can download accounting and bookkeeping apps to keep your income, expenses, and taxes properly organized. It makes it much more straightforward for you to manage your financial records.
The best part is that using the right software means you don’t even have to be the most technologically savvy business owner. Some are designed to stay elegant and straightforward so that only the essential features are used, and you won’t be overwhelmed when tax season approaches.
Overall, it will give you more confidence that everything is organized and ready to go, leaving you more free time to focus on making more profit.
To Sum Up
Finance is the backbone of any business, so they deserve special attention and proper treatment. You may also read more tips or contact an accountant if you don’t already have one, and ask them to find the best place to start.
But all in all, just following these simple accounting tips for startups and established businesses should ensure that your company is financially healthy now and for years to come.
Photo by Scott Graham