For many business owners, managing finances is the scariest aspect of owning a business. It is easy to get caught up in the more creative side of designing your website or choosing a business name. If you don’t know how to keep your finances in order, you could run into dire financial difficulties.
You can save your company by implementing simple accounting strategies. In today’s article, we look at a few tips to help grow your business.
1. Keep Accurate Records
When you own a startup, you need to learn how to do accounting and record keeping for small business. Most of your day-to-day accounting details can be easily tracked online via your credit card and banking records. However, it’s important to keep all this information compiled in one location so you can review it at a glance.
To start, you can hire someone part-time or as a freelancer, so you’re not paying a full time wage for these services. Many business owners invest in software that makes it easier to do bookkeeping for small business. Invest in software that allows you to track the money flow and has an integrated invoice feature. This proves to be very helpful when the time comes to file your taxes.
2. Open a Business Bank Account
Opening a new bank account under your business‘s name is one of the first steps you should take when starting your business as the results of mixing personal and professional finances can be disastrous. Keeping your personal and professional finances completely separate makes tracking the flow of money convenient. Moreover, a separate bank account also makes it easy during tax filing. If your company is a sole proprietorship, you aren’t legally required to open a separate bank account for your business, but it is still strongly recommended that you do so.
3. Keep accounts receivable payments separate from borrowed funds.
Small business owners need financial backing and/or loans for startup capital, marketing campaigns, and other initial things in the early days. To make sure the loans don’t appear in the receivables, use software that separates income from borrowed funds. It is imperative that you be aware of what is yours and what needs paying back.
4. Don’t allow clients to get away with not paying balances.
Seeing a large amount in the receivables column is a good thing, but the money doesn’t really count until it is in your bank account. Don’t let clients avoid regular payments. Stand firm and insist you receive payment for past orders before letting them have more materials or services. The receivables department is crucial in keeping your company afloat. It may make sense to improve your invoices or to update your billing and invoicing software.
5. Detail daily expenses so you can budget for the coming weeks.
It’s a good idea for business owners to keep records of everyday expenses they incur in the company. Instead of calculating expenses every two weeks for payroll purposes, focus on every day or every week. This can help you have a better idea of where finances are each week and how much money you’ll need to budget for in the upcoming weeks.
6. Calculate a minimum monthly profit.
When planning how much it takes to keep a small business running, the numbers can get complicated. Devise an accurate system of expenses and regular obligations so you know exactly the minimum income you need every month. Because income can be the easiest to calculate, make a strict target you’ll need to earn. Without that exactitude, accounting becomes confusing and your business can suffer.
Accounting is as important as your first week in business and during the time of tax filing.
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