Life as a small business can be difficult; there are so many different things to take care of, and fewer hands available to assist. Nevertheless, one area you certainly need to keep in order is your accounts. However, this is a lot easier said than done. With little time to spare, it can be easy to lose track of the money you have coming in and out. This can lead to huge cash flow problems so you really need to have an established process in place when it comes to your company’s accounts. Below, you will find some great small business accounting tips to help you get started.
Meet your deadlines – There is only one place to begin, and this is with the importance of meeting deadlines. You don’t want to suffer an unnecessary fine simply because you have submitted your tax return a few days late. There are very few allowances, so don’t take the risk. The best thing to do is keep a note of all of your tax deadlines on a board at your office so that you can see it all of the time.
Schedule profit and loss statements – Secondly, it is advisable to schedule profit and loss statements, as this is an excellent way of checking the health of your company. These statements will provide an insight into numerous areas of your organisation. This can help you to summarise your activity and see any areas that must be addressed moving forward. You need to decide on how regularly you are going to schedule these statements. Most people opt for either monthly, quarterly, or yearly reports. There is no right or wrong answer; it all depends on the activity of your business.
Look for ways to reduce your expenses – As a small business owner, you need to be constantly on the lookout for ways you can reduce your expenses without reducing the level of quality you provide. Of course, the options available to you will all depend on the type of business you operate. For those who have a fleet to manage, for example, a WatchCard could be just the thing you need to make significant savings. This card will enable you to track and monitor all fuel purchases so you can make sure that you are running your fleet as efficiently as possible.
Keep borrowed funds and accounts receivable payments separate – There is nothing more disheartening than thinking you have more money than you actually do! But, this can easily occur if you keep your accounts receivable payments and borrowed funds together. Most small business owners require a bit of financial assistance to help them get started, such as a loan or financial backing from another party. You should use software that separates your loans from your receivables so that you have full clarity of what is yours and what needs to be paid back.
Get contribution and donation receipts – Does your business make charitable donations and contributions to outside organisations? If so, it is a good idea to get a receipt, as you will be able to make the most of tax breaks if you do this. However, you will need to have a record to back it up. It is easy to forget about this but you should easily be able to go back to the organisation and ask for a receipt or confirmation so that your records add up – you never know when you could be audited!
Don’t mix business and pleasure – One of the biggest mistakes that small business owners make is using the same card for business and leisure purposes. Let’s give you a scenario. You take your children to the cinema, and you are about to pay for the tickets, drinks, and popcorn. You go into your wallet, and your business credit card is handy. You may as well just use it. After all, you can put the money back in there at a later date? It sounds simple enough, but if you have this attitude, things will get complicated fast. You are only making life more difficult for yourself in the long run, so it’s important to keep the two things separate.
Get to grip with your expenses – You should keep a record of all of the expenses you expect your business to incur over the coming weeks and months. Regular monthly payments are easy to budget for. However, it is the daily expenses that can throw small business owners off. The best thing to do is make a note of everything you spend daily over the next few weeks. This will help you to have a better idea of what you spend per week, and thus you will be able to budget better in the future.
Hire a chartered accountant – It is understandable that you may be sceptical about hiring an accountant. After all, this is a service that is going to cost money. Nevertheless, you should view it as an investment, as it will save you money in the long run. Your accountant will ensure that your books are in check and that you are not overlooking anything important. They will also alert you to tax breaks to ensure you are tax efficient. Aside from this, hiring an accountant will free up time so that you can focus on the core of your business, i.e. what makes you money. The best thing to do when searching for an accountant is to look for fixed fee accounting services. This ensures you know exactly what you are going to be paying out every month.
Keep accurate records – Your forecasts and budgets will not be effective if your records are not accurate to begin with. You will be able to track simple credits and debits to your account with ease via online banking. However, when it comes to how things were earned or spent, you need to keep separate records. This includes the likes of employee reimbursements, what things have been bought via credit card, and how cash was spent. You should keep everything in one place, as it will be a lot easier to manage.
Chase clients for payment – A poor approach to invoicing can cause huge problems at any business, especially when it comes to cash flow. When giving out your invoices, you need to make sure that the payment terms are clear. If your client does not pay you by the date in question, you should send them a reminder via email straight away. If you do not hear anything after a few days, you should call them. Speaking to someone over the phone can be much more persuasive, as it is easy to ignore an email.
So there you have it – the basics of small business accounting. If you follow the tips that have been provided above, you will have a good starting point for ensuring that your business’s finances are kept in check. The best thing to do is to hire a chartered accountant. That way, you know you will always have an expert to turn to if you need assistance, and you can have the peace of mind that everything is being handled above board.