Nearly all small business owners are not professional accountants in any fashion. Now, whether their skills lie in management, technology, marketing, or anything else, they have to understand the intricacies of small business accounting. The positive news is that all small business CPA accounting is fairly easy. Businesses with operations in a single state and have a simple hierarchy have these common accounting principles: to make sure their revenues are in line with the expenditure, keep their accounts clean, and pay their taxes on time. However, small business accounting can be an overwhelming task for business owners without any financial understanding and training. There are quite a few businesses that often choose to still do the accounting tasks on their own while others choose to opt for an accounting firm or a CPA to help them out with these accounting duties. It might cost them a little, but in the end, it is only more useful for them. This way the business owners can focus on other immediate business operations.
Major accounting tips for your small business
Keep your Business Account Separate
One of the most common mistakes small business owners can make is to merge their personal and business accounts. More often than not, small business owners fund their own startup but business accounts and expenses must be separated from personal accounts. The best option is to have a solid business structure. You must establish your business as a separate legal entity. Then, open a business checking account as your financial center and pay yourself a salary from it every month just like you pay your employees. Next thing is to opt for a business credit card for all the expenses where you do not wish to pay cash. When you do that, it is important to record any personal items bought for the business. Having an accountant to help you with your business accounting will be helpful as they will guide you about this right before you start your business.
It is evident that doing a simple thing like expense tracking can impact your business profits and improve your personal and business tax return. The most common mistake incurred by a small business is to calculate expenses every two weeks or every month during the payroll processing. Instead of doing that, you can make it a habit to do daily expense tracking for all your business expenses. Frequent expense tracking will offer you a better understanding of how much your business is actually spending and help you establish better money management tactics. You can’t be managing or tracking your expenses on your own all the time. Having a certified accountant who handles this task will make it convenient for you to take care of your expenses better.
Proper Organization of Records
It is always better to keep proper track of your business records throughout the year, instead of struggling at the end of the year during the tax period. You can establish a method of handling your data, cash management and timely review of your bank statements to stay on top of your business accounts. Keep a track of all your receipts even if it is for a charity. Take time out every week to organize your paperwork and make sure you are on track with your accounts. The best thing about having an accountant help you out is that you get all your accounts and records in order. This only makes for better business management.
Precise invoicing is the best way to ensure everyone is paid on time depending on the priorities. Take out some time initially to devise an invoicing system like tracking work completion, determining the frequency of invoicing, clear payment methods, and create professional invoices for your clients and vendors.
Accurate Profit and Loss Statements
How do you determine if your small business is profitable or actually losing money? An accurate profit and loss statement is a summary of your company expenses, costs and business revenue on relevant dates. You can opt to do this on a monthly, quarterly or annual basis. By accurately tracking and examining your profit and loss statement can assist you to understand the health of your business and plan better for the future. If this is something you need help with, you can consult any small business accounting services in your city.
Track your Account Receivables
Accounts receivable is also a fancy term for the money that your business is owed from the customers for your products or services. It keeps your business running efficiently. In hindsight, late payment and unpaid invoices can hurt your cash flow in the near future. Additionally, the longer it takes you to send an invoice, the longer it will be for the customer to make your payment. You must build a great business structure to follow up on your accounts receivables in a timely manner. It is best to schedule a particular day of the month to send out all pending invoices for the month and another day in the following week or two weeks to send a reminder or a follow up. You can try to extend credit on written grounds as a one-off incident and document everything if you ever need to go through a collection agency. If you need help with building a solid accounts receivables team, you can contact a cpa columbia md to help you do that.
Now that you have all the major tips to manage your small business accounting, we hope this guide will help you to increase your profits and give you a sound sleep during the tax season. If your small business needs any additional help, you may seek help from a certified cpa in columbia who can manage your taxes. If your business is still new and do not have enough budget to hire an accounting service, you can consider getting an accounting software which can essentially do the same job for you.