If there’s one thing that stresses out small business owners, it’s accounting. But the irony is that bookkeeping is actually very simple…when done right. If you can simplify your approach and develop the right system for your business, accounting will no longer be a pain for you.
The importance of having good bookkeeping
There are things that excite business owners. Marketing, branding, sales, and even parts of the manufacturing process can get the juices flowing. Accounting, however, is not one of them. Despite this, it is one of most important elements to run a successful business.
Accounting helps you track income and expenses, so you have a clear idea of where you stand at any given time. It also helps to gauge overall business performance and make smart projections about where things will go over the next 12 months.
From a regulatory point of view, accounting ensures legal compliance. This ensures that you pay all taxes correctly and that your finances are organized accordingly.
The list is lengthened increasingly. Accounting plays a vital role in keeping your business legal, profitable, and productive. If you want your business to grow, you need to take this aspect of your operations seriously.
5 tips for better bookkeeping
You don’t have to make massive, drastic changes to your accounting. In most cases, consolidating a few shortcomings and improving specific issues can lead to positive growth. Here are some helpful suggestions:
If you mix up your personal and business expenses, you will get yourself in trouble. This is pretty basic advice, but we have to say it anyway. (A surprisingly high number of small business owners make this mistake).
Business and personal expenses should be separated. If you have an LLC, this is actually a requirement. (Any mix will pierce the corporate veil and leave you unprotected.) But even if you run your business as a sole proprietor, keeping things separate makes it easy to track expenses, take advantage of deductions, and make accurate financial projections.
Migrate accounting to the cloud
There is no sense in using traditional software-based accounting or paper books. We live in 2021, which means you need to take full advantage of the resources available. This includes cloud accounting software.
With cloud accounting, all data is hosted in the cloud (as opposed to a specific device or server). This provides better security and better remote accessibility. It also gives you full scalability, which means your accounting system grows with you.
One of the trickiest aspects of bookkeeping is recording expenses. And if you don’t get into the habit of recording expenses right away, it’s easy to lose track of the expense and/or forget about it. This can hurt your bottom line and prevent you from taking full advantage of things like deductions and credits. To make it easier to record expenses, you can download an expense app which allows you to take a photo of the receipt and quickly file it in the appropriate place.
In addition to tracking your bookkeeping on a daily and weekly basis, it’s a good idea to sit down for a quarterly review four times a year. This is where you take a detailed look at your accounting records and bookkeeping. Be on the lookout for emerging trends (like declining sales or increasing numbers of overdue customers). Based on this information, you can implement new rules or processes to move your business in the right direction.
Having good cloud accounting software makes bookkeeping a breeze. However, as your business grows, so do the accounting requirements. At some point, you may find it useful to hire an accounting professional. They can leverage your software and provide weekly reports on what’s going on in different areas of the business. It’s also a good idea to hire a CPA to handle your annual tax returns. The right person could potentially save you thousands of dollars a year by helping you optimize costs, deductions, credits, etc.
Set up your business for success
Accounting is no easy feat. If you plan to run a successful business that stands the test of time, you need to have your numbers in order. By improving your approach to small business accounting today, you can pave the way for growth tomorrow.