Small business owners have a lot on their plate from managing everyday activities to ensuring the long term prospects of the company are sound. For example, they have to look into making and maintaining an effective website, ensuring the employees and the customers happy, ensuring good cash flow for the business and much more. In all this accounting is one area, which is overlooked and takes a low priority while in fact, it is a vital area that needs to be looked into and should not be avoided at any cost.
Easy tips for small businesses to manage accounting
A successful business can be attributed to many factors and one of them is keeping track of accounting. Here are a few tips that can help you keep the books neat and tidy.
Track your expenditure: As a business owner, it is essential to maintain cash flow so that the business is not short of money. For that to happen it is necessary to track the flow of cash. Every expense should be recorded and categorised so that it becomes easy when you are paying taxes. In addition, you should know of any unpaid invoices that can affect the cash flow and also interrupt the running of the business. Experts recommend that the use of business credit cards is best over dealing with cash as that can get you rewards and points. Moreover, it will also help to avoid collecting paper receipts, which can be easily lost before you file it.
Do not mix personal and business accounts: Many business owners make the mistake of using personal funds to keep the business afloat for a few months. It may be a necessity sometimes but having a separate bank account for personal and business needs and keeping track of how that is being spent is essential. If there is an audit on the business and the IRS finds that personal expenses are mixed with business expenses it could start looking at your personal account too due to commingled money. It is best to use separate credit cards for business and personal expenses and use business accounts for business and personal accounts for personal expenses.
Hire a professional for taxes: Entering and updating tax records or accounting records and keeping it neat and orderly is what a professional does best. They will not only know about the latest in tax law but also about loopholes that can be advantageous to your business. These professionals tax lawyers are good at providing tax representation to all types of clients and will be aware of the tax deductions, requirements of the IRS and much more. By handing over the responsibility of handling taxes to tax lawyers, you can save a lot of time and money. You can hire them on an hourly basis or on a weekly basis but getting professional help will ease a lot of your burden on taxes and help with planning.
Ensure that you understand the jargon: While you are working with professionals for accounting or for tax filing purposes ensure that you understand all the jargon. Though the tax lawyers make sure that they do not use it, you may find some of the terms confusing which you should clarify. It is essential for you as an owner to know that terminology often used in the industry even if you are not a financial professional. By having a clear understanding of things you can use the tips they provide to better use.
Dedicate time for updating records: Ensure that you spend enough time every week on tracking, labeling and organising all the invoices and receipts. That will help you while filing taxes at the end of the financial year. In addition, it may help to invest in an accounting application that helps in categorising the expenses and easily updating the records. Additionally, all the documents should have a back up for further use.
Know what you are paying to employees: Salary that you pay for the employees will account for more than 50% of the total annual budget. Also, track the perks and other employee benefits that you are paying including overtime as that will help with calculating the payroll taxes. Another thing to do is to track the in and out time of the employee with a time tracking software, as that helps with payroll management.
For any business to be successful and continue to maintain that success, it is essential that the finances be maintained properly. The accounting tips mentioned above will help in keeping track of your accounting so that your business is never in trouble money-wise.