Jeff’s Note: Even though I enjoy running this micro business, there are a lot of things that need to get done behind the scenes that I dont really like doing, and one of them is accounting. I’ve been better about in the last 2 quarters of 2014 than I ever have (and I hope my taxes reflect that) but it’s still a huge chore for me. I thought I’d share some tips on how to get it done with a bit less pain.
Among the long list of essential items that occur naturally from managing your small business lies the fundamental issue of accounting. While having an advanced degree is definitely not a prerequisite for running a small business successfully, some fundamental accounting skills could save you considerable frustration and money.
Even if you have the resources to employ an accountant, a lack of knowledge in accounting could permit fraud from an unscrupulous accountant. Many small businesses fail due to the lack of appropriate bookkeeping. One of the most essential elements shared by every successful business of whatever size is maintaining accurate records; this is also legally required.
An advanced course in Accounting 102 could equip you with the necessary skills. However, you would have to initially graduate from the accounting basics. Although this accounting task may prove monotonous or tedious, it is crucial to the success of your business. If you are seeking a way to improve your business management, these accounting tips will prove invaluable.
- Engage Professional Services
For a considerable period, accountants have been revered and respected allies to proprietors of small businesses. Their vast professional knowledge and familiarity with tax and finance laws will save you considerable money.
Although hiring an accountant is costly, it will give you a peace of mind. These professionals are likely to process fiscal data rapidly, keep abreast of tax law amendments, and answer your queries. While it is tempting to save money by performing this task on your own, it is almost never cost-effective.
A professional will usually discover more deductions while helping you avoid penalties. The suitable accountant could also become a trusted advisor to your business. You will have an opportunity to collaborate and consult on forecasting and budgeting, cash flow management, and business performance. Finding the appropriate accountant is vital for small businesses, which have fewer resources and complex needs.
Manage and Track Expenses
Tracking expenses is crucial to your business’s success and maintenance of accounts. You can accomplish this by recording payments and gathering receipts. The infrequent meal expenditures or traveling costs also require documentation and appropriate handling.
A failure to maintain accounts could prevent you from building a dependable financial statement or prepare reliable reports on tax returns. Furthermore, it becomes hard to monitor your business’s growth or expenses.
Keeping track of your expenses is crucial for tax purposes and enables adjustments during economic or market changes. Although most small business proprietors do not look forward to managing their expenses, staying on top of your accounting tasks is an excellent means of decreasing your stress when preparing your taxes.
Separate Personal and Business Finances
Numerous business owners mix their professional and personal finances. Open separate accounts and debit/credit cards that you will use exclusively for managing business expenses. For instance, it is easier to track business receipts if you do not use the same card to pay for office supplies and groceries.
If you need to locate a forgotten expense, you simply need to go through a single account instead of several. Maintaining separate credit card and bank accounts will save you hours of work and help track deductible expenses.
You should also maintain separate business records when using financial or accounting management software. You should consider using a program designed specifically for small businesses for instance QuickBooks or Mint.com.
Document Business Transactions
It is important you document every business transaction. If you record an amount for expenditures and fail to maintain receipts, you may not recall what the figure was about after a few months. Ensure you file receipts and documentation in an accessible manner.
Documentation is necessary for your business to operate effectively. Information is also necessary for accounting purposes to determine whether you are making losses or profits. Backup documentation is also important if you need to conduct research, have questions, or for audit purposes.
Reliable Accounting System
You should use a reliable system that you have previously tried. Accounting software, especially online software can revolutionize the functioning of your business. Numerous affordable options aim to simplify accounting tasks and maximize financial performance.
Accounting systems offer numerous benefits including accessibility and user friendly features. You can also examine real-time economic data at whatever time and location since the system stores information online. Online software can incorporate with numerous business applications. This implies that you can manage all your business’s aspects without performing manual data transfer.
Small business owners perform various roles. Completing payroll is one of the most essential tasks in operating a small business. Payroll affects all aspects of a business from your employees’ morale to your business’s financial stability.
Whether you have independent contractors or employees, they have to receive payment for their services. A payroll system will help streamline your capacity to stay on top of your regulatory and legal duties as an employer. Moreover, this system can also protect you against costly penalties.
Small businesses usually face accounting challenges since proprietors normally assume the role of bookkeepers. Nevertheless, these friendly Shopify tips will help you observe tax laws and place you in a better position to monitor your cash flow and finances.