Accounting tips for your small business
As a business owner they are a ton of things for you to do when you’re just starting out — From getting the small basic stuff, like pens and pencils, needed for your operations to the big things like marketing including your finances. As a small business and start-up that is yet to grow sometimes you will need to do the accounting function yourself.
Finance is the backbone of any business, so learning good small business accounting practices is a must.
When you are just starting out you can do your own accounting and get away with it, but when the time comes for submission of taxes I would advise getting professional accounting services to help you with this to save yourself the time and unknown penalties you may incur. But in the meantime, here are some Accounting tips to help you get started with your business:
Separate your business and personal accounts. As soon as you start, make sure to open either a Business Bank Account, or if you’re a sole trader, a separate current account that’s specifically for the business. Mixing up your business and personal accounts will cause trouble for you down the line. It will be difficult for you to declare your income when it comes to your submissions and it will be difficult to establish an audit trail. This simple practice will save you tons of hours and future problems down the line.
Track all your business expenses. From the start of the year, keeping track of expenses effectively is absolutely vital to your business accounting efforts. This is a crucial step in properly monitoring the growth of your business, building financial statements, preparing tax returns and tracking deductible expenses.
Record your income. Revenue from sales and other cash infusions are easy to lose track of. Therefore, develop a habit of making systematic occasional bank deposits of your revenue. This will help you track all your revenue and it can be done by recording all your bank deposits (which you can easily see on the bank statement) and accurately identify the source of the deposit. Failure to this can lead to unnecessary payment of income taxes.
Practice regular book keeping. Once you learn a few easy basics, bookkeeping becomes exciting unlike what most people think. Like some major parts of the business it is an ongoing process and needs to be done regularly. Set aside time to solely update your books. Depending on the size and activity of your business you can update your books every day or weekly or monthly or on a quarterly basis. Tasks that need regular update will be your customer payments, business expenditure, updating your payroll file etc.
Prepare for major Expenses. Unexpected expenses are common when running your own business and these should be diligently prepared for so as not to plunge you into dire financial straits when things go wrong. They are also expenses which shouldn’t come as a surprise to you Examples include replacing equipment or machinery, computer upgrades, tax other statutory submissions. Properly make financial arrangements for them in order to avoid a cash crunch. So plan ahead.
Get an accountant. If you can afford to, get help from a professional. Hiring a professional bookkeeper or accountant; even for just a few hours a week or month, can make a big difference. Having someone who has already been in that position can take a huge weight off your shoulders. Instead of you having to deal with the numerous legal implications and creating business plans, to tax planning and deciding whether to register for VAT, you will have someone to give you their professional help.
Accounting is a necessary function for any business and it will help you move your operations forward.
Are there any other accounting tips you would like to share for other business owners? Leave a comment below and share them. And if you need help you can contact me on my email that is email@example.com .