Small business owners have a lot of responsibility. When it comes to the overall financial status of the business, a well organized accounting system will do wonders. Not only can it provide you with an accurate snapshot of the current financial health of your business, it can assist in budgeting, expansion plans and sales projections. But this doesn’t automatically happen when you fling open the doors to a new business. Here are some tips on how to manage small business accounting duties.
1. Record Things Correctly
It may sound obvious but until you’ve been there, you really don’t know how easy it is to mess up a few entries in your accounting software program and have to chase down that error in order to balance the books. Even if you are not using computer accounting programs and are recording sales and expenses manually on paper, you need to concentrate on making those entries correctly. That’s because a wrongly placed decimal point or transposed pair of digits can put the status of your bookkeeping into question. Avoid this by being extra careful with your data.
2. Watch Your Invoices
The combination of overdue and unpaid bills can amount to a huge chunk of your operating revenue still yet to be collected. The best way to avoid this from getting out of hand is to have someone on staff who tracks the entire process. That means once a bill goes unpaid for a specified period of time, a process is undertaken to recover that loss. Sometimes that involves sending another invoice, making contact with the person or adding late payment fees. Your process should address outstanding invoices from 30, 60 and 90 days after due date.
3. Build Reserves
There is going to be a time each year when business is extremely busy and cash flow is awesome. This is the time to start to set aside some extra cash in a reserve fund. All you will be doing is putting a bit away to cover expenses – including taxes – when business hits a slow down. At least with a reserve that can cover up to three months of the expenses, your business can weather a short storm should one come about. A reserve also allows you to update equipment or work on expansion plans without having to borrow the cash to do so.
4. Plan For Big Costs
Any business is going to encounter some major costs sooner or later. If you have a short term and long term plan with a budget in place, your business will stand a better chance at working through the big expenses required in order to stay in business. Changes in technology and your specific industry may give you the direction you need in order to make a plan that a reserve fund can help to finance. Upgrades to equipment and staff training should be part of this plan.
5. Keep Tracking Costs
It isn’t easy to keep all expense data under control without some kind of assistance. When you try to track everything yourself with a goal of balancing the numbers at the end of each business day you can easily lose track of tax write offs and other ways in which you can streamline the expenses to raise your bottom line. A business credit card may be the most useful tools your small business will have in keeping many of the expenses recorded in one place.
6. Explore Accounting Software Options
There was a time when accounting software was pretty much designed for large businesses with a corporate presence. With the ease in which these programs work, most options can be adapted to suit and fully function to fit the needs of small businesses. QuickBooks is a standard go-to for many but QuickBooks alternative ZipBooks is also a great, affordable alternative for small business operators in need of an accounting program that can do everything needed in a small business environment.
7. Consider Outsourcing
Although it may sound costly, outsourcing your accounting needs is a common practice in the world of small business. With so many qualified bookkeepers working from home, you can save a lot of money when you hire a remote worker. You will want to consider outsourcing choices that will range from local and regional to overseas. If time zones are an issue for communication you will want to attempt to outsource to someone who is closer to your business geographically.
8. Avoid Over Complication
Sure, it is a lot easier said than done. The intricacies of small business bookkeeping does involve a great deal of attention to detail. However, if you chose to keep the task in-house, your greatest success from doing so will come from simplifying the process. When you implement a process that streamlines the cycle from sale to invoice, your business will run smoothly and should not encounter much in the way of hurdles or issues. Keeping it simple is a good business plan.
Small Business Accounting Is Essential For Any Business
There is no specific threshold that determines when your business is big enough to have to be concerned about proper accounting procedures. Essentially, the moment you make your first sale you will need to have a system in place that will record and calculate all future business transactions. The tips listed here are just a few that are considered the most important for any small business owner to consider having in place in order to succeed. A well run business is one that has all processes in place and that all of them function properly. Accounting is one of these processes that must be operating correctly as it is directly related to the health of your business.