Accounting is arguably the most important consideration when starting up a company. Without a solid understanding of numbers, it’s difficult to survive. The streets of entrepreneurship are littered with business owners who have ignored the financials of their business, and usually they realize the importance of numbers before it’s too late. Many businesses collapse due to a failure to address financial structure, and a critical mistake made by business owners is believing you can do everything yourself. If you’re wondering how to ensure your financials are in order, here are some top accounting tips for small businesses:
Hire a Professional
Unless you’re a numbers wiz or have a degree in accounting, working with a professional is advisable. To get to grips with your business accounting and financials, you should ask yourself how can I benefit by hiring a bookkeeper? Though every start up situation is unique, if you don’t intend on building an empire, outsourcing your accounting requirements makes sense. This will allow you to focus on your core competencies. You can benefit from the specialist knowledge of a professional who is trained to help you gain tax advantages and to prevent legal penalties arising. If your business expands, you should look into hiring an accountant as you add additional employees to your payroll. If this is too expensive, continue using a bookkeeper on an as-need basis.
Cash Versus Accrual Accounting Methods
The two generally-accepted accounting methods are cash accounting and accrual accounting. As a small business, the law states accrual accounting is mandatory, but if your situation permits, you might have the option of choosing one or the other. The accrual method indicates your real-time financial health. It can be as easy as checking a box in accounting software, where technological advancements have made accounting initiatives much easier. The best way to determine which method applies is to check with a financial professional, who will guide you accordingly and can use a sophisticated billing and receivables module to track your business’ records.
Keep Accurate Records
Keep everything in one place for simplicity’s sake, because it helps when you don’t have to scramble to meet a request. Today’s digital age allows you to handle and track banking services online, and this facilitates improved organization. Though online banking can track simple credits and debits, separate records must be kept to accurately state how things were spent or earned. These include what things were purchased via credit card, and whether reimbursements were made to employees.
Sort and File Receipts
Keeping an accurate file of receipts is tedious, but it will save headaches later on. Keep all receipts, and photocopy and scan them. Collate your receipts by date, and categorize expenses accordingly.
As a business owner, it’s important to understand the basics so you can communicate relevant information to accounting professionals. Though you can probably get away with doing your own bookkeeping in the early stages, as things progress you’d be wise to work with an accounting and consulting firm. They can provide the leverage and infrastructure necessary to effectively fulfill financial duties.
