When it comes to managing a small business, paying close attention to your business finances is essential. Having good bookkeeping and accounting practices will help you keep track of your expenses and manage your profits responsibly.
Almost 82% of small businesses fail due to cash flow-related issues. To help you ensure your business keeps growing and doesn’t end up like them, we have listed 13 effective bookkeeping and accounting tips for small businesses. Read on!
1. Track all your business expenses and avoid overspending
As a small business owner, tracking and documenting all your business expenses is necessary. Unnecessary expenses – even if they are of smaller amounts – can have a significant impact on your finances. So, make sure you know where each dollar of your business is going.
2. Keep your personal and business finances separate
This is one of the golden rules of bookkeeping. None of your personal expenses or incomes should make their way to your business’s finances. Keeping them separate will make bookkeeping and accounting easier and quicker for you. You will be able to manage your business expenses more accurately and make tax preparations without many complexities.
3. Have a bookkeeping system in place
Having a well-structured and clear bookkeeping system for your business will reduce multiple issues and confusion. It will enable you to stay organised and manage your finances effectively. For this, you can use popular bookkeeping and accounting software like QuickBooks or FreshBooks or even hire a professional bookkeeper.
4. Don’t forget to reconcile your accounts regularly
Reconciling your accounts is a must to avoid any discrepancies or inaccuracies. It will help you stay on top of your business’s finances and find out any potential issues immediately.
5. Always have all your receipts with you
Many small business owners don’t keep their receipts with themselves. But doing so is necessary for making tax deductions seamlessly. You can keep physical copies of each of your receipts in a separate folder. Or you can scan them and attach their e-copies with their respective transactions on your bookkeeping software.
6. Review all the accounting reports
As a business owner, it is your responsibility to review all the accounting reports regularly. This will help you understand the current financial health of your business and make future decisions accordingly. Some common accounting reports you should review include cash flow statements, A/R aging reports, etc.
7. Create a solid business budget
Having a business budget is an excellent way to allocate resources and plan your expenses effectively. Reviewing the accounting report will give you a clear idea about your finances, and you will be able to prepare your business budget in a better way.
Along with this, you can also consider getting cheap business insurance for your small business. It will help you protect your business during financial emergencies. Click here to learn more about cheap business insurance.
8. Consider outsourcing payroll management
Payroll tasks like issuing monthly paychecks, deducting and managing employee taxes, and filing them are time-consuming. Thus, consider outsourcing your payroll management and accounting to save time and get things done more efficiently.
9. Send invoices as soon as possible
As a small business owner, invoicing promptly is vital to maintain the sound financial health of your business. So, always ensure to send your invoices within 48 hours of product delivery or service completion.
10. Remind customers about the payment deadlines
Once you have sent the invoices, you must keep track of the payments and deadlines. To prevent customers from missing payment deadlines, send them a quick payment reminder a few days before the due date.
11. Know all the current tax laws
Being aware of all the tax laws, tax deductions, and credits is essential to file your business taxes accurately and avoid penalties. While understanding taxes can be a bit complicated, make sure to dedicate enough time to learn about them.
12. Keep track of accounts receivable
This is the money your customers and borrowers owe to your business. To avoid losses and maintain a healthy cash flow, keeping an eye on your accounts receivable and following up on late payments is incredibly important.
13. Assign tasks to a bookkeeper
Now that you know the expert tips and tricks for managing your small business’s bookkeeping and accounting, it’s time for a critical decision. You need to decide which tasks you want to handle yourself and which ones you want to allocate to a bookkeeper. Tasks like payroll management, preparation of monthly financial statements, etc., can be assigned to a bookkeeper.
With the right bookkeeping and accounting tips, managing your business finances will become a breeze for you. So, make sure to note down the above-mentioned tips and tricks and implement them in your small business. Remember, adopting good financial practices today will pay off for your small business in the long run.