Unless an individual is an accountant or who he really likes to work with numbers, accounting is not a favorite task. Nevertheless, adopting some good habits in the early stages of your small business can help avoid the larger ones later on. After integrating your new small business, it is essential to put in place processes and systems to handle any unpleasant surprises.
Systems also help small businesses to remember important documents and even goals. That’s because keeping your books properly can greatly help both make and maintain long-term financial goals for your small business. It can also help mitigate seasonal fluctuations in cash flow and even improve profits.
Entrepreneurs who run small businesses around the world need to stay focused on accounting by accurately managing marketing expenses, accounts receivable and debt in order to avoid the sinking of the business. That is, accounting is essential to the very success of a small business.
It is possible to successfully manage a small business through the following 5 accounting tips:
Plan for Big Expenses
It is important to be honest with yourself about the kind of expenses that will appear in the next few years. This is because it could result in upgrading of facilities and equipment. It is also important to recognize that your small business will have financial ups and downs, affecting your ability to spend in these times.
Prediction of major upgrades or even the peak of personnel costs will help instill discipline during the favorable months. This means that no money is taken from the company even when things are good. In this, a small business is not affected during the slow months.
Tracking his expenses
It can be difficult to track expenses, and it’s bad because a small business does not take advantage of tax write-offs. Small business owners can use business credit cards to make sure every expense is properly tracked.
However, this requires that a company be up to date with all its payments. Taking notes on your schedule of when you met a customer for events, lunches and coffee dates helps in preparing for audits. It helps justify expenses for tax records in the event of an audit.
The same goes for car mileage which requires the recording of miles traveled and the cost implication. A Google map is a modern tool that can help you a lot.
Registration of deposits
It is important to keep a good record of the amount of money that is deposited in your company’s bank account. This is mainly because a wide range of deposits is made in the company ‘s bank account throughout the year. Therefore, it is essential to be able to account for each deposit made or the company may pay taxes for money that is not an income.
Putting money aside for taxes
Tax payments are mandatory and small business owners have sufficient knowledge of when this is done. That is why it is advisable to systematically set aside the money that will be used solely to pay taxes. If taxes are not paid, there are high interest rates and severe penalties that can be inflicted.
Putting it aside will systematically ensure that it will be available as needed. You can do this on a monthly basis or when contracts are paid. This helps to relieve stress when taxes are due.
Keep up to date with the bills
Unpaid bills and late bills can hurt the cash flow of a small business. The company can hire someone to effectively track billing. Then, define a process for when the invoices are not paid. A convenient way to do this would be to issue a second bill, collect penalties and make a phone call.
Prepare a plan for late customers, say 30 days, 60 days and 90 days late. The main reason being late payments are considered interest-free loans that affect the cash flow.
Starting a new business requires diligence, but accounting is an area that is grossly neglected. With the 5 insightful tips above, accounting should not be the reason you do not start your small business. Follow most of the accounting tips above, they might just be what will keep your small business afloat when times get tough.