As a small business owner, there’s no limit to all the things that pass through your mind on a daily basis. One of them is money and how to keep track of it. Revenue tracking, maintenance and utility costs, profit, and all those numbers generate heaps of paperwork. You don’t have to drown on small business accounting pitfalls though. Apply this seven accounting tips to your small business to see immediate results in productivity:
1. Bank Account
Once you have legally registered your small business, the next step is opening a bank account that separate business income from personal funds. If you are a sole proprietor, this is especially important. You can also open a savings account to save a percentage of payments to go towards sole proprietor tax withholding.
2. Record Keeping
There are a couple of types of records to keep track of legal documents and financial documents.
Legal documents are things like business licenses, DBA certificates, sales tax licenses, and anything else that support the legality of your business.
Supporting financial records include invoices, payroll documents, receipts, and so on.
3. Tracking Records
Divide up any legal documents and supporting financial statements. Keep a daily record of inbound and outbound payments to get a snapshot of how much money comes into and leaves your business on any given day. With a clear record of your cash flow, organizing employee payments (if necessary), operation expenses, bills, and taxes becomes much more comfortable as well.
4. Book Updating
One responsibility as a small business owner is scheduling enough time throughout the work week to do bookkeeping. Yes, it’s boring—but essential. Block off a few hours every five days or so to complete paperwork, update your records, and sift through the receipts, invoices, and other records you need to keep.
5. Look Ahead
If you are keeping track of current expenses, then you will have an excellent idea of how much flexibility you have for future, unexpected expenses, like computer repairs and upgrades, equipment maintenance, and so forth. This way, you won’t wind up crunched for money if something unfortunate happens.
6. Follow-Up
As a business owner, people inevitably owe you money. If you send out invoices, you can never be 100% sure you’ll be paid, so follow-up. Know where pending payments are coming from. Should it get out of hand, use online payment software or cloud-based accounting and invoicing services to automate the process.
7. Software
Free accounting software like Wave, Turbo Cash, and ZipBooks are excellent ways to systematizing the entire accounting process. While no software is perfect, you are going to want to choose an option that has developed features like business tax reporting, inventory management, and support.
Starting and maintaining a small business can be hectic at times, but if you apply these seven accounting tips, you’ll have your finances in order in no time. Soon, your business will grow, and success will be yours.