If you are a business owner, one of your undeniable concerns will be to take care of your accounting processes. Finding out the best way possible to do your accounting will reflect on the growth and development of your firm. On the other hand, if you stick to the older and slower techniques of accounting, your business will irrevocably stay stagnant. Read the tips below and educate yourself on the knowledge of efficient small business accounting.
1.Separate Business And Personal Expenses
Once you get your Employer Identification Number (EIN), you should create a business bank account. This is to avoid mingling your personal and business expenses because doing business transactions on a personal bank account will create a big problem. Opening a business bank account will help you differentiate personal funds from business funds. It also has the merit of keeping track of the business expenses and assists tax reduction. It provides a line of credit that can be used by the company to cover cash gaps.
Apart from differentiating personal and business expenses, every business must open a savings account, current account, credit card account and merchant services account so that the customer will be provided with multiple payment options.
2.Keeping Records
Bookkeeping is one of the most necessary duties for a small business. One should always keep track of the expenses and payments. As a business owner, you should try to bring in online payments to your firm so that keeping records of your payments will be easy. There are opportunities for cashback on online platforms. In addition to this, try using accounting software that automates the process of keeping financial records. Such software will be helpful to document the data of your transactions and will ultimately help you in tax deductions. Try to avoid payments through cash, as much as possible, so that your process of accounting will not consume hours. If you don’t have any option other than cash, remember to take digital copies of the receipts.
3.Keep Tabs On Income
Be careful with the records of your income, exactly like the way you are with your expenses. Be it loans, sales or anything else, keep track of every single penny that is coming to you. It is equally important to keep tabs on income as it will reduce your headache during accounting. By following this tip, you can escape from paying unnecessary fines in tax.
4.Update The Books Often
If you want to know the current status of your business in development, you should keep updating your books. Bookkeeping will give you a clear idea of where your company is, in the long run. One efficient way of doing it is by linking your bank account with your accounting software. Some effective software excels in accounting by automatically collecting data from your bank and store day-day transactions. While using the accounting software, there will be no room for errors and the reconciliation process will get easier. Another way of updating the books is by doing invoice capture.
5.Monitoring Payables
One of the steps that shouldn’t be avoided is monitoring your payables. If ignored, it could even bring down the cash flow of your company. Keep an eye on the payable and receivable of your firm, for they will help you determine plans for the future. Educate yourself with your payables and correct if there are any errors before things get out of control.
Complete the pending payments to the suppliers on time such that there is no delay in the supply of raw materials in the future. For a business owner, the payables should be taken care of all the time.
6.Monitoring Receivables
Receivables, on the other hand, is the money owed to you by your customers for the goods or services you provided. To keep your financial health stable, you should keep an eye on the receivables. Receivables are available in your balance sheets under the section ‘current assets’, and all you have to do is to make sure your money reaches you on time.
7.Financial Check-ups
Performing a financial check-up on your cash flow is mandatory to make sure your business is heading in the right direction. Though you might be using traditional bookkeeping methods or modern accounting software, you still need to spend some time and energy reviewing the numbers from your books. This is necessary because as a business owner, you should monitor the trajectory of your development so that you can know if your company is moving towards your vision. It is a good habit to check your finances and it will make sure you reach your goal.
The main motto of this practice is to trace the stability of your finances. By keeping the stability of your finances in a good manner, you can keep the credibility of your company excellent.
8.Get A Grip On Taxes
If you are running a business, knowing how income taxes work is mandatory. You cannot run your business without paying taxes. You have to deal with them every year and you should be well prepared for it. Do research on the percentage of taxes for different areas of business. Excluding your business expenses along with salaries and rents, you should be paying a particular percentage from your profit as the tax. When you have a clear record of your books, you will know better about tax obligations. You should allocate certain money for tax bills. If you keep your books clean, the process will go smoothly.
9.Digitize Everything
As a business owner, you might be pushed under the compulsion to allocate a lot of space for keeping paper documents and other bills. If that is still a headache for you, update a little bit from the primitive method of keeping data in physical form. Try to convert your bills, invoices and all other documents into digital and prevent the need to keep hundreds of files that contain dozens of papers. By doing so, not only your time is saved but also the inconvenience of scamming and manually searching through heaps of papers will be prevented. By digitizing, you will not miss anything and there is no danger of data being lost. Convert all paper-based documents into digitized documents and let your reconciliation process become stress-free.
10.Using Automation
While the world is accelerating at a greater speed than ever, why are you still sticking to primitive practices? It is time for you to use automation and let it upgrade your business. Most small business owners are switching to automation to get their accounting done faster.
If you are still using manual data entry for your accounting, it is high time to think of an alternative. An alternative which not only saves your time but also your money. If you have a financial team to take care of your bookkeeping, such automation tools add up to their productivity. You should pay the person who types for you, and in return, he/she will do the data transfer in some hours and with some random errors. Such errors will pull up a greater mess at the time of the reconciliation process.
Whereas, if you use an automation tool, the process of data entry will get automated and there is no room for any errors. Your time, energy, money will be saved along with the credibility of your records. Something that takes hours to get completed will be finished within seconds if you use automation. For example, if you are using QuickBooks for your accounting, then PayTraQer is a smart option to sync your online transactions into QuickBooks automatically.
Let your books be clean and perfect as you switch your way of accounting. These tools have free trials too that you can try and explore.
11.Future Plans
If your business is doing well now, that does not mean you have reached a saturation point. You have to be clear on the financial pathway of the future. By doing so, you can make sure that your business will do well in the long run. Financial projections and profit-loss statements will help you analyse these strategies. Make wise decisions on future financial plans and your business will grow exponentially.
Conclusion
In your busy schedule, you will hardly have any time to rethink your business strategies. But spending time changing your accounting methods will be a great asset to your business. Like gold and land, spending your time knowing the best accounting process, will yield you great fortune in the future. Follow the above tips and you will have your records clean. If you have further queries, try contacting an accountant for more details.
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