Accounting in an integral part of any successful business. But whilst bigger companies have legions of finance experts behind them, smaller business owners can often find themselves dealing with accounting responsibilities all by themselves. This doesn’t have to be some mammoth, unachievable task, however, and if you follow these six basic accounting practices, you’ll be in a position to handle whatever your business can throw at you.
Establish Separate Business Accounts
One of the biggest mistakes a small business owner can make is mixing business with pleasure — transactions that is. Having business expenses paid into and out of a personal account can cause an accounting nightmare for both you and the taxman. Worse still, if you miss anything you’ll technically be committing fraud if it ends up affecting your tax returns. An easy solution is to simply set up a separate business account. No mix up, no confusion, just easily identifiable business transactions.
Budget For Taxes
One problem I often see is small businesses assuming that all money they take in is theirs. However, this is simply not the case, as the taxman will soon be on your back. My advice is to make an educated guess at your annual income early on in the year, as this will allow you to identify roughly how much tax you will owe at the end of the year. I understand that being a small business income can fluctuate, but getting a ballpark idea of overall income allows you to save enough every month to pay off the taxman. If you avoid doing this, you are left with having to scrape together a lump sum to pay your taxes bills and if you save and discover you’ve saved too much, well, there’s a little bonus for you.
Get Some Dedicated Bookkeeping Software
The books aren’t actual books anymore. They are spreadsheets and databases stored on computers, easily accessible, adaptable, backup-able and understandable. While you can record your transactions anyway you like, it is highly advisable that you invest in dedicated bookkeeping software. These specially designed products help you organize your books effectively and are well worth getting for smooth financial operation.
Keep Your Receipts
Receipts and invoices can easily begin to pile up and get in the way. It can be tempting to simply record the transactions they represent in your books and throw them away, delete them (if they are electronic) or simply lose track of where they are.This is a big mistake. Even if the transaction was years ago, it is important you keep these invoices and receipts in an easy to access place. Why? because it’s all evidence. Evidence for the taxman, evidence for yourself when looking over your finances and records for customers in the event of disputes. The best idea is to keep all your records in one place, either stored on a computer or in a good old-fashioned filing cabinet. Whatever you decide on, make sure you regularly update it with all your receipts and you’ll always be prepared for any unforeseen problems.
Make Sure You Get Paid On Time
Operating a small business means you most likely have multiple clients and are dealing with a variety of projects. Therefore, it can be easy to get caught up in work and forget about one of its most vital processes: getting paid. This is actually a more common problem than you might think, but it is easily remedied by a simple monitoring system, whereby work done for a client is noted and as is when payment is received. At the end of the month you can refer back this system, be it a computer file, spreadsheet or a handwritten note and make sure all bills are settled. You should try and encourage early payment by offering a discount to clients who pay promptly.
Don’t Forget The Experts
Contacting an accounting service when you need support doesn’t mean you’ve been defeated, nor does it mean you have to add a new employee to your roster. There are plenty of contractors out there that can help you deal with complex or deep-rooted problems and it’s essential that you do. Accounting can get complicated and if you come up against a problem you just can’t solve the longer you wait around trying to sort it out the worse it might get.
Words by Russell Smith, a chartered accountant in Leeds, UK. Russell is an accounting expert with over a decade of experience running his own business, Russell Smith Chartered Accountants.
My mom owns a small business but she always has trouble with the accounting side of things. Thank you for providing these 6 tips to better accounting. I think one of the major things causing her issues is that she still uses an actual book for her bookkeeping. I will be sure to get her some good software like you suggested.
Wonderful tips for better Accounting.Keeping receipts with you is very important or you can save data on your PC.This will help you in future.Thanks for posting!
Establishing separate business accounts is very important to avoid any trouble plus getting some dedicated bookkeeping software is very important for managing accounts.Very informative blog post,thank you very much!
It’s good to find these accounting improvement tips. To do a better accounting services, I think these tips will be very helpful.
Becoming better in accounting has so many benefits. Accounting jobs are very respective and usually accountants gets a huge salary for account management of a business. So, I’m honestly learning and improving my accounting skills and these 6 tips will surely improve my accounting skill.
You make a good point about distraction and payment. As many as you have, it’s worth paying attention.
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Hi,
Thanks for being sharing such an important information. I would like to add more.
Everybody wants to save money in life. Calling accounting outsourcing companies can solve your problems. One thing is sure in outsourcing your accounting tasks, you save the extra money that is given as salaries or other facility expenses.
There are numerous accounting related tasks that may be required to outsource. The list may include data entry, managing expenditure accounts, bookkeeping and lots more.
By outsourcing your accounting work, you can also keep a close watch on other departments of your business.
Regards
Dennis M. Pickell
Great advice! Especially about keeping track of receipts. Even if it seems redundant and there is electronic evidence, it’s ideal to have paper copies as well just for safe measure.
Hiring professionals in handling some stuff will also benefit you to be confident of good transparency.
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Don’t waste time on doing things that require professionals. Hire the best to get the best services out there for your company.
Well, Accounting is really helpful for your business. Whether you have an online business or offline, it will help you to configure the business growth and more.
Thanks for brightening up six tips (important tips) which will surely help us further.
You have done great job!
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Even if it seems redundant and there is electronic evidence, it’s ideal to have paper copies as well just for safe measure….
Ya, this is such a lovely and informative post. I did not have much idea about benefits of using Xero. But after going through your blog I genuinely earned lot about Xero. Simple I can say that it is a cloud based system that means it can be accessed from any where over any time. It means someone does not have to worry about files being email back and forth. It also allows a business owner to create, send and automate customized, professional looking invoices. It also provides a high level of security having automatic back up facility.
This will give you access to much better job cost reporting which is critically important for architects who want to understand how well you are bidding jobs. In other words, you want to understand how profitable your current jobs are so you can get better at bidding future jobs that are similar.
It is not a waste of money to hire professionals in some help. In the long run you will notice it in your company the improvements and benefits.
Helpful tips in helping the accounting steps to do in for a business. Really a lot of help. Thanks for sharing.
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It’s always great to have a combination of financial talent to back your business, not just for the lower cost, but the efficiency as well. Your article really illustrates the number of ways an accounting firm can boost a small business’s prospects. Thanks for sharing!
I really like your idea to put money aside for paying taxes. My brother just opened a small bakery and he’s not great at accounting. I will pass this tip onto him but I think I’ll suggest that he hire an accounting service.
It’s constantly extraordinary to have a mix of monetary ability to back your business, for the lower cost, however the proficiency also. Your article truly shows the quantity of ways a bookkeeping firm can help a private company’s possibilities. Much obliged for sharing!
These are practical tips for an effective Accounting System for all businesses! There are a lot of businesses that have failed because of neglecting to hire or consult with experts in this area. It sure is great to learn this tip from this blog.
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Small businesses always have challenges due to insufficient funds, everything from bookkeeping to tax payments is handled by the single professional most of the time. Improper financial analysis sometimes leads you towards wrong future predictions. HOWEVER, these of your tips to overcome the most important issues of accounts handling could help most of the businesses to some extent. A great piece of content. Thank you
if you follow these six basic accounting practices, you’ll be in a position to handle whatever your business can throw at you
Small Business always need an accountant for managing their business day to day accounting tasks and file tax on time, in order to prevent businesses from getting any tax penalties.
Its time when the world is moving towards digitalization and cloud computation for making every process smoother. Switching to accounting business software in your business makes your hassle much easier. Checkout SmoothAccountancy.
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I use Quickbooks online. It currently is about $40 a month but man it is so easy to use and sync’s with all my banking, credit card accounts.
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Very informative article for someone who owns small business or thinking of starting a new business enlightening the importance of bookkeeping.
Better Accounting is a professional service for small businesses in need of assistance with taxes, bookkeeping, and other financial matters….your article is very impressive..