Finances are everything in your business. They make or break you. But you probably already know this. Nonetheless, you must participate in your company's financial management as a small business owner.
However, we understand that preparing your books and being on top of accounting is probably the last thing you want to do, given how busy you run your business and other tasks. Unbelievable as it may seem, there are several actions you can take now to position your company for significant success that is also simple and stress-free.
You can stay organized and comprehend how accounting data may improve the operation of your company by implementing the following ten bookkeeping and accounting tips:
1. Keep your business and personal finances separate
We know storing everything in one place is tempting, especially when you start. But finances can get confusing if you have one account for your personal and business lives.
Whoever is in charge of your finances, even you, will have fewer transactions to sort and reconcile if you remove any personal transactions from your business accounts. More than half of the transactions in some small enterprises' "business" accounts were personal. Organizing your personal transactions would take time, cost money, and might be inaccurate; this is why keeping them separate from the very start of your business is essential.
2. Pay yourself a salary
Speaking of separate finances: pay yourself a salary. As you may have heard, C and S corporation owners must pay themselves fair compensation and process it through the payroll system like any other employee. However, it is also essential for self-employed business owners, independent contractors, and partners to also pay themselves a "salary," even if, in reality, it would be an owner's draw and not a component of payroll.
Doing this promotes the idea that your company is a separate legal entity. As mentioned, this helps you keep finances separate since you won't have your company directly cover your personal expenses. Have the business write you one check each month that you deposit into a different account used to cover your costs, as opposed to multiple transactions throughout the month when the business pays an expense on your behalf.
3. Use programs or apps to automatize systems
There is a lot involved with accounting, which can get confusing. So, automation can save small business owners' lives like yourself. You and your staff will have more time for the business as you automate other processes.
To do this, consider the following:
Consider automating your accounting tasks with accounting software to simplify your accounting obligations. When looking for accounting software, you should consider storage, accessibility, and security.
Make a list of the features, costs, and reports that your company absolutely must have.
Do the proper research to determine which software will perform best for your and your company's demands.
4. Get a bookkeeper
Getting someone who will track all your business's revenue and expenditures is essential for financial management. A bookkeeper will ensure that your business has the relevant information to make wise decisions. For this reason, it's a smart investment to hire someone specifically for the job or to outsource the role.
Many bookkeeping chores, such as sending invoices and paying bills, are necessary for the operation of your company. Other responsibilities, however, like closing the books, resolving conflicts, and creating financial statements go outside the scope of your typical business operations and may be better left to a professional.
5. Keep records of everything
It is very easy to forget a document that can affect your finances. But the health of your company's books depends on how well you organize and maintain accounting records such as business invoices, receipts, and costs.
Additionally, make sure to keep records in a safe place, whether in a physical or digital location. Even better, you can have copies both ways to assure protection in case of destruction, misplacing, or getting lost.
6. Develop a budget
Once you have all the book information, creating and reviewing your budget is easy. Small firms that evaluate their budgets weekly, monthly, and annually have success rates of 95%, 75%, and 25%, respectively, according to a US Small Business Administration survey.
According to the report, successful small businesses share similar financial management characteristics. These can include better than average unused credit balances, the capacity to set aside funds for emergencies, and regularly reviewing the budget.
7. Make categories of your business expenses
It can be challenging to plan for certain expenses in your budget. While certain expenses are predictable, others come as a surprise. But if you plan and prepare for the unexpected, your company will do much better over time.
Keep a careful record of all your expenses, including those for supplies, inventory, insurance, and utilities, when it comes to your books. Create a strategy or add a section for unexpected expenses in your budget for dealing with unforeseen costs. In this manner, you will be able to anticipate higher spending and prevent surprises in the future.
8. Keep up with tax deadlines and processes
Another vital aspect to keep in mind within your finances is taxes. Knowing which tax laws apply to you and your company will help you determine the types of taxes you'll owe. Make sure you do your homework on the following: business rates, income tax, national insurance, corporation tax, and VAT.
Speaking of those deceptive tax deadlines, do all it takes to remember that they are drawing near. An approaching tax deadline can be very stressful, particularly if you're hurrying because you forgot, and any errors can take longer to correct.
9. Plan for the future
With the correct accounting and finance management, your company can determine the ideal moment for significant expenditures and predict the need for business financing to meet the costs of growth. You will know when you need additional capital by continuously tracking expenses and earnings. Understanding when to acquire capital and having it handy is an attribute of a financially healthy business.
According to Federal Reserve research, 45% of companies with excellent financial health reached some type of financing, compared to just 3% of companies with poor or below-average financial health. Nonetheless, if you need alternative business funding, there are some great options available.
10. Evaluate your business performance
Using different financial statements to track your expenses and income will help you understand where you stand. You can use balance sheets, income statements, and cash flow statements. A balance sheet provides a snapshot of the company's financial position at a particular time, while income statements assist in determining the company's profitability. Finally, a cash flow statement reveals whether the company has enough cash flowing into and out of business during a specific period and how much cash is still on hand. These can all help you understand your obligations, projections, and the performance of your business overall.
Ensure your Financial Success with One Park Financial
Now that we have gone through an overview of what it can take for you to have a thriving bookkeeping system, you might want to check how to ensure your business is financially stable and grow even further. With One Park Financial, you can access a network of funding sources that offer amazingly flexible approval terms for small business owners.
As long as your business has at least three months and generates $7,500 in monthly revenue, our team of professionals will be more than happy to help you find the proper alternative funding. Want to get started? Applying by filling out our online form today.
Disclaimer: The content of this post has been prepared for informational purposes only. It is not intended to provide and should not be relied on for tax, legal, or accounting advice. Consult with your tax, legal, and accounting advisor before engaging in any transaction.