6 Tips For Better Accounting

Accounting in an important aspect of any successful business. But whilst bigger companies have a large number of finance and accounting experts working for them, smaller business owners often find themselves taking up accounting responsibilities themselves. 

This doesn’t have to be some mammoth, unachievable task, however, and if you follow these six basic accounting practices, you’ll be in a good position to handle whatever problem your business throw at you.

So the big question, how do small businesses maintain basic accounting? As a small business owner, if you find yourself doing your accounting yourself, the following tips will help small businesses maintain basic accounting while strategizing on how to make more profit.

If you are a small business owner, you have to avoid using the same account for your business and personal use. In fact, one of the biggest mistakes a small business owner can make is mixing business with pleasure — transactions that is.

Paying your business expenses from your personal account can cause an accounting problem for both you and the taxman when computing tax at the end of the period. In worst cases, if you miss anything while computing tax, you will be committing fraud technically if it ends up affecting your tax returns.

The best and easiest solution is to simply set up a separate personal and business account. Hence, there will be no mix up, no confusion, only easily identifiable business transactions.

2. Budget For Taxes

One of the problem I often notice is small businesses assuming that all money they make from the business belong to them. However, this is not true, as the taxman will soon come chasing after you.

My candid advice is to make an intelligent guess at your annual income at the beginning of the year, as this will help you to estimate how much tax you will pay at the end of the year.

I understand that because you have a small business, income can fluctuate i.e, income will not be stable, but getting a small idea of total income allows you to save enough every month to pay your tax.

If you avoid doing this, you are left with having to scrape together a lump sum to pay your taxes and if you save and discover you have saved too much, well, there’s a little bonus for you.

Also Read: 10 Soft Skills For Accountants

3. Get Some Dedicated Bookkeeping Software

Gone are the days when bookkeeping is done in a book. These days, the books aren’t actual books anymore. They are spreadsheets and databases stored on computers which can be easily accessible, adaptable, backup-able and understandable.

There is nothing wrong with recording your transactions anyway you like but it is highly advisable that you buy dedicated bookkeeping software, it will help reduce some stress. These specially designed products help you effectively organize your books and are well worth getting for smooth financial and business operations.

4. Keep Your Receipts

Receipts and invoices can easily begin to pile up and be too much to handle. It can be tempting to simply record the transactions they represent in your books and throw them in a bin, delete them (if they are electronic) or simply lose track of where you kept them.

This is such a big mistake. Even if the transaction was years ago, it is important you keep these invoices and receipts in places you can be easily accessed. Why? because they all serve as evidence. They are evidence for the taxman, evidence for yourself when going through your finances and records for clients in the event of disputes.

It is advisable to keep all your records in one place, either stored on a computer or in a good old-fashioned filing cabinet. Whatever you decide on, make sure you update it regularly with all your receipts and you’ll always be ready for any unforeseen problems in the future.

Also Read: Cash or Accrual Accounting: How to Decide On Which Method To Use

5. Make Sure You Get Paid On Time

Running a small business means you are more likely to have multiple clients and are dealing with several projects. Therefore, you can easily get caught up in work and forget about one of its most vital processes: getting paid.

This problem is actually more complex than you might think, but it is easily remedied by setting up a simple monitoring system, whereby work done for a client is recorded when payment is received.

At the end of the month you can refer back to this system, be it a computer file, spreadsheet or a handwritten note and be sure all bills are settled. You should try and encourage early payment by offering a discount to clients who pay on time.

6. Don’t Forget The Experts

Outsourcing your accounting needs when necessary doesn’t mean you’ve been defeated, nor does it mean you have to bring in a new employee to your business and increase your payroll.

There are plenty of accounting experts out there that can help you solve complex or deep-rooted accounting problems and it’s  necessary that you contact them.

Accounting can get complicated and if you encounter a problem you just can’t solve, the longer you wait around trying to sort it out the bigger it might get.