Starting a new business is an exciting thing to do. Actually getting the business off the ground and running smoothly, on the other hand, can be a bit of a challenge. A lot of small businesses, especially new ones, end up not being able to stay afloat and operate sustainably because of one simple problem, which is bad financial management.
Even when you want to keep the entire process of running a small business as fun as it can be, it is still necessary to pay attention to how the business is managed. This means getting your books in order and doing proper accounting so you can always tell how the business is doing. To help you manage your small business accounting better, here are the seven bookkeeping tips every small business owner must know.
Keep Detailed Records from the Start
One of the worst mistakes you can make when it comes to small business accounting is thinking that you can do accounting later. You can’t. Once the business is running and you have hundreds – or even thousands – of transactions to manage, catching up and getting your accounting in order is even more difficult to do.
The best course of action is keeping your records organized from the start. This means gathering receipts, organizing them accordingly, and maintaining detailed records of your business incomes and expenses. Yes, you need to do accounting from the very beginning to keep the business in order.
Separate Personal and Business Finances
Another common mistake that small business owners still make is using the same account for both business and personal purposes. While this may seem like a practical thing to do at first, you will end up with both finances getting mixed up. Trying to separate them later is a pain that you don’t want to go through.
The moment you decide to open a new business, create a separate account for that business. Deposit your starting capital and always keep track of the subsequent deposits and withdrawals you make from that business account. You will find consolidating your incomes and expenses to be a lot easier this way.
Know When to Get Help
Here’s some good news for small business owners – accounting services aren’t as expensive as you think. If you are not sure about whether you can do your own small business accounting, hire an accountant and let professionals handle your bookkeeping for you.
Having professionals doing your small business accounting actually has its perks. For starters, you can avoid costly mistakes and be more efficient with how you manage your money. You also have the ability to ask for financial advice, including advice on how to make the best financial decisions.
Lastly, professional accountants can help you save on many things, including your regular expenses, your taxes, and other business costs. For example, professionals can calculate the best time to pay invoices based on discounts and payment terms provided by your vendors and suppliers.
Watch Your Cash Flow
Cash flow is the heart of every business, even when it is a small one. For the business to remain healthy and for it to grow in a sustainable way, a healthy cash flow is absolutely necessary. Having a healthy cash flow means being able to pay your bills on time and having enough cash for operational purposes.
A healthy cash flow isn’t that difficult to achieve and maintain as long as you keep your books in order. With the help of good accounting, you always know when bills and expenses are due, when your next payments will arrive, and how you can balance your business finances accordingly.
Start Saving
We all know how important having emergency funds is as a professional, but it is even more important to save some money for emergencies when you are a business owner. The same applies to your business too. You need to start saving a portion of your income for business-related emergencies.
The small business emergency funds don’t have to be particularly big, especially when you are just getting started. It is okay to start by aiming for an emergency saving equals to one month of business expenses. After hitting that mark, save more and expand your emergency funds to cover three to six months of operations.
The purpose of having emergency funds is keeping the business afloat during slow times. There will be slower times along the way. With the funds in place, you can continue operations, keep employees paid, maintain good relationships with your suppliers, and continue to grow your business.
Automate!
Doing proper bookkeeping today becomes easier now that you have more accounting systems to use. Even when you decide to get help and hire an accountant, you can still choose the accounting system you want to use and benefit from the features it offers.
Cloud-based accounting systems are the best. You can access the system no matter where you are, plus you don’t have to worry about keeping your business financial data save over a long period of time. You can also turn to automation tools to simplify more tasks and make small business accounting very manageable.
Automation is the way forward. Rather than doing everything manually, you can now process transactions, generate invoices, and even create reports with a click of a button. The more you automate, the easier keeping detailed bookkeeping will be.
Evaluate and Improve
One last piece of the puzzle that many business owners often neglect is regular evaluation. Just because you are comfortable with the accountant you work with and the system you use, doesn’t mean there aren’t ways to improve your bookkeeping further.
Doing regular evaluations of your books – or thorough audits of your business – is part of bookkeeping best practices that you need to stick with. Through regular evaluations, finding ways to improve efficiency and enhance the way you manage your small business is certainly easy to do.
These seven bookkeeping tips are tips that every small business owner must know. Implement them into the way you handle business finances and accounting, and you will be able to benefit from better financial management, a detailed understanding of the business, and smoother operation in general.
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