For many small business owners, managing and controlling finances is regarded as one of the scariest aspects of owning a company. If you struggle with keeping your finances in order, you could end up in dire financial difficulties. Thankfully, there are lots of money management skills that you can learn, as well as useful tips that can be incorporated seamlessly into your operation. With that in mind, here are five essential accounting tips for small businesses.
Keep Accurate Records
When running a small business, you need to learn how to do your own accounting and record keeping. To do this effectively, there are various tools that you can use at your disposal. You can consider either Wave or Quickbooks who are regarded as some of the best accounting tools by PieSync. The company can connect your tech stack, which will empower your small business and keep it running smoothly.
Open a Business Bank Account
If you go down the route of mixing your personal and professional finances, blurring the lines can result in disastrous consequences. One of the first steps that you need to take when launching a new business is to open a new bank account using your business name. Keeping your personal and professional finances separate will make tracking the flow of money much easier. What’s more, having a separate bank account will make life a whole lot easier, especially when tax filing season comes around.
Keep All Your Receipts
While you may deem it unnecessary to keep receipts, sales slips contain expense details and dates which can come in handy should you need them in the future. Rather than storing all your receipts in a singular folder, it’s best to organize them based on category. Doing so will make things much easier when tax filing season arrives, meaning you can make accurate deductions. You will also be able to keep track of where most of your money is going.
Master the Art of Invoicing
If you haven’t got much experience in running a company, invoicing will naturally be an unfamiliar concept. However, it’s crucial for recording specific details about day to day transactions in your small business. Invoices are also used to encourage clients to make payments within the deadline you set. Accurate invoicing will help you stay organized, and help you to contact clients who frequently fail to pay within the specified period. The rule of thumb is to never add to an invoice once it has been finalized. If you start to make changes after submitting to a customer, this can cause confusion to not just you, but your clients and accountant.
Create Profit and Loss Statements
To give you a better indication of the financial health of your small company, profit and loss statements are a must. A profit and loss statement should summarize the costs, expenses, and revenues your company incurs during specific dates. Profit and loss statements can also reveal information that is relevant to your business’s ability to generate profit.
While the financial side of your small business may be overwhelming to tackle initially, the more knowledge you gain about how to manage your accounting, the more confident you will feel.