Amidst the incredibly long list of to-do items that naturally occur from running your own small business lies the necessary task of accounting. As tedious, annoying, or monotonous as this may be, it is critical to the success of any business that these records be managed appropriately and efficiently. Here is a quick list of 7 accounting tips for small businesses to help you maintain your business better.
1. Do Your Homework
It’s important to understand the different tax forms, write-offs, laws or licensing requirements that apply to your business. An awareness of these policies can help protect and stabilize your business in the long run.
2. Open an Account
Creating a separate account for your business makes it easier for you to keep track of your business’s income and simpler for you to do taxes. Start with a simple checking account and add savings accounts as necessary. Also consider the benefits of having a business credit card to help you start developing credit.
3. Keep Track of All Expenses
It is critical to the maintenance of your accounts and the success of your business that you collect and track your expenses. This can be accomplished by gathering receipts and recording payments. Even the infrequent meal expenses or traveling costs need to be documented and handled appropriately. Failing to maintain these accounts can prevent you from being able to build a reliable financial statement or prepare trustworthy reports on your tax returns. It also becomes difficult to monitor the expenses or growth of your business.
4. Bookkeeping
Accurate bookkeeping is necessary in order to compile clear and precise reports as well as determine how your business is doing. In that light, be sure to research your bookkeeping options thoroughly to ensure optimal maintenance of your accounts.
A DIY route requires tracking all of your expenses and meticulously documenting them in a spreadsheet. Then, it must be deciphered and interpreted to produce clear data and exact reports. For many business owners, this option simply asks too much of them, as they have limited time that should be spent on moving their business forward, rather than on tedious accounting work.
Another option is to simply outsource your bookkeeping and accounting. For those that already have too much on their plate, this is a valid consideration. American Funding offers this option to our existing factoring clients.