6 Ultimate Small Business Accounting Tips
One of the biggest headaches for both small businesses and entrepreneurs is keeping the company’s accounting up to date.
To help you with, we give you 6 essential small business accounting tips that are necessary to make your business flourish.
6 Essential Accounting Tips for Small Businesses
Keeping your accounts up to date requires organization and planning. These two fundamental pillars will facilitate your work and allow you to reduce costs, saving time and money. In addition to taking this into account, understanding some aspects of basic accounting is essential to guarantee the viability and proper functioning of your business.
#1. Learn to separate your personal finances from those of your business
It’s a common problem in small companies, and it is that many times there is no clear division between the income obtained by the entity itself and your personal salary. This can end up affecting the financial balance of your business. The most advisable thing is to open an exclusive bank account for the company’s operations. In this way, you can better monitor the inflows and outflows of money, and more effectively manage the cash that your business generates.
#2. Avoid unnecessary costs
A vital aspect of the basic accounting of a company is to have a routine to write down all the movements, expenses and income, in detail. But at the same time, you must know how to manage your costs very well and differentiate those that are unnecessary from those that are essential for the profitability of the business.
Outsourcing involves more costs; consider what activities or tasks you need to outsource to increase productivity or save money. Do the same with providers. Remember that you must monitor expenses and take the necessary measures to improve the profitability of your business.
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#3. Balance your cash flow
The cash flow is a crucial concept of basic accounting must take into account, as it will be critical to the viability of your company. Cash flow reflects actual cash outflows and inflows, reflecting the liquidity of the business. And to keep complete control of your company’s finances, it is essential to monitor the inflows and outflows of resources. In this way, you can also avoid unnecessary expenses that may affect other obligations, such as payments to the Tax Agency, Social Security or suppliers.
#4. Beware of deadlines
Another critical aspect that you have to take into account to keep the accounting up to date are the deadlines, especially in the tax area (personal income tax, Corporation Tax, withholdings, VAT, etc.).
Remember that not complying with your tax obligations or committing any other type of tax offence is a penalty from the Treasury. For instance, if your business fails to register for vat, you may face a penalty with HMRC. So, don’t forget to register your business for VAT.
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#5. Invest in good management software
Surely you are thinking that keeping all these tasks up to date and having good management of your accounting is quite complicated for someone who is not an expert on the subject. But don’t worry! There are solutions!
What is clear is that to be able to control all these aspects of basic accounting, you will need time. The problem is that this is one of your most essential resources when running a business. However, some solutions will make your life much more comfortable.
eBetterBooks can help you simplify the complete management of your business and keep all your accounting, bookkeeping and billing tasks under control. This online accounting and bookkeeping services are safe and effective.
The fastest and most reliable way to know the liquidity status of your company and to know if your financial plan is being fulfilled is to consult the accounting professional.
For this to be possible, your accounting books must be up-to-date with the daily record of capital movements. Most of the time, it is not done like that, but we wait until we have a good day to introduce a significant volume of seats at once. Perfect accounting also requires good planning when working. And if you have doubts or do not have enough time for this task, you always have the option of transferring the company’s accounting to an expert.
#6. Accounting calendar
All companies, regardless of their tax system and size, have accounting, legal, tax and social obligations:
- Presentation of VAT returns (monthly, quarterly or annual), income statements (tax package) and various returns.
- Preparation of annual accounts (balance sheet, profit and loss account and appendix).
- Holding of an ordinary annual resolution of the general meeting on the financial statements of a closed fiscal year.
- Establishment of payroll and declaration of social income.
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- Put in chronological order all accounting documents, both income, expenses, as well as other operations such as collections and payments and file them in folders.
- Make the accounting entries corresponding to each document. What is often called “mincing data.”
- Make the bank reconciliation, that is, add the corresponding invoice or receipt to each movement, so that the balance agrees at all times.
- Review all accounts and balances to verify that there are no duplicate or erroneous entries.
Additional Small Business Accounting Tips to Consider:
Be aware of disruptions: Accounting in the business world is changing very rapidly, its management being utterly different from that of ten years ago. In some cases, evolution can take place more quickly and, in others, it is a gradual transition. Regardless, change is an opportunity and companies will derive more value from their accountants if they view them less as financial managers and more as consultants with specialized knowledge and deep operational and strategic insights. Accountants and companies willing to embrace this change will be at the forefront of future business leaders, while those who resist run the risk of being left behind.
Be consistent with your accounting records: Try to follow a routine to record your information and keep it up to date. For example, record all your expenses at the end of the working day and assign a fixed day of the week to check the payment status of your invoices and, if necessary, send payment reminders to your clients. If keeping your accounting up to date becomes one more habit during the week, everything will be more accessible for you!
On the other hand, remember that in order not to scatter the documentation and to be able to make a quick analysis of your accounting, it is convenient to bring together all the information in the same space.
Author Bio:
My name is Vivek Gururani. I am a Digital Marketing professional and Content Strategist at eBetterBooks – A leading bookkeeping, accounting, taxation, financial reporting service provider in the USA.