Accounting is a necessary evil in the small business world. It’s one of those tasks all entrepreneurs know is part of running a business but few realize how easily it can suck up your day and make operating a successful business harder than imagined.
Although it can be a tedious task to keep your finances in order, it’s extremely important. It helps you make informed decisions about daily operations and gives you an understanding of how your revenue and expenses are doing. Maintaining your financial records also makes tax reporting and payments less overwhelming.
Here are a few things you can do to help keep your small business finances in order.
1. Open a business bank account.
Once you’ve registered your business, you will need somewhere to keep your business income. Opening a business checking account and a savings account will help you organize your business funds and plan for taxes.
LLCs, partnerships and corporations are legally required to have a separate bank account for business. If you’re a sole proprietor, you’re not legally required to have a separate account, but you should definitely consider it.
If you want your business to succeed, you need to be able to monitor and track your key performance indicators, including cash flow, expenses, revenue, profit and more. By separating your personal and business accounts, you can easily track these key metrics and make your life much easier come tax time.
2. Invest in tools and software.
There are lots of tools out there to help you better understand your business’ finances. Solution range from a simple Excel spreadsheet, to DIY platforms such as Quickbooks or Wave, to enterprise-level software solutions.
The key is finding the solution that will work best for your needs and your desired level of involvement. The goal is to be able to collect data on income and expenses so you can monitor funds, forecast for the future and budget accordingly.
3. Hire an accountant.
Many entrepreneurs are hard-wire to try to handle everything themselves. Although there are many aspects of your business that you can manage on your own, accounting is one area that is worth turning over to a professional.
Although it’s easy to balk at the expense of working with a bookkeeper, they will be able to help you save money over the long haul. Plus, it gives you the much needed time to focus on operating your business.
Choosing the right accountant is one of the most important decisions a small business can make. A good one can help you with your taxes and find ways to keep cash flowing; a bad one could cost you your hard earned money. Check out this article to read our tips about how to pick the right accountant for your business.
4. Create a budget.
Part of being a well-organized business owner is creating a well thought-out budget. While this can seem like an overwhelming step for many entrepreneurs, it’s just as important as creating a business plan.
Don’t think of the budgets as a tool for planning out how every penny should be spent. Rather, it’s a framework that you can use to help you make well-informed decisions, such as whether you can afford to increase your marketing budget, lease a bigger office or give well-deserving employees a raise.
Create a budget and then use it as a guide throughout the year. Give yourself the leeway to make adjustments to it when needed.
5. Make it a habit.
Reviewing balance sheets and profit and loss statements isn’t everyone’s idea of a good time. However, understanding the financial health of your business is a critical part of any small business owner’s role.
Make a commitment to spend at least 30 minutes every week looking at your finances and discussing any outstanding issues or challenges with your accounting team. This will help you make better decisions and prepare for any potential challenges in the future.