Many people know on some level that accounting is incredibly important, regardless of the size of the business. But for small business owners, basic accounting often takes a backseat to more pressing concerns like dealing with customers and day-to-day management. One risks crippling their business if accounting is treated as an afterthought
If you keep detailed books and figures about your figures, you can forecast months into the future and prepare for the highs and lows. If you have the right data, you can even derive insight that will help you fill in financial gaps and prepare for expected difficulties. That’s why there are specialized accountants for doctors and other professionals
Many people think that managing finances is one of the main challenges of running a business. One of the top reasons why accounting is a low priority for many small businesses is that it’s tedious and dull work. Some people might also feel intimidated by the meticulous recordkeeping involved. But one small mistake with the figures can cost you thousands of dollars
1. Save the receipts
Always save the receipts for all business-related expenses. Missing expense reports can result in all sorts of accounting and tax issues down the line. How can you be expected to manage your finances if you don’t even know where your money goes?
If you’ve had to rack your brain for a two-hundred-dollar charge to your bank account, then you’re doing it wrong. If possible, pay for all expenses with a credit card dedicated to your business. That way, you’ll have a statement you can turn to every month. For out-of-pocket expenses, make it a point to take a photo of the receipt right away
2. Manage your receivables as they come in
One of the most fun parts of running a business is getting paid for your products and services. But keeping a record of your receivables isn’t quite as exciting
When you issue an invoice, you also log that the customer owes you for your services, also known as the receivable. Keeping meticulous records allows you to check which customers have an outstanding balance. Once the customer settles their balance, the payment should be reflected as paid on their invoice
However, if you don’t have someone helping you with your accounting, you often put off reconciling the deposits to a later date. Maybe you just don’t have time to manage your receivables. But when the time comes that you actually do the work, you might find that your payments that don’t match and there are discrepancies in your records
To keep this from happening, update your transactions as soon as they happen. You can do this at the end of every business day. This will save you lots of time and resources down the line
3. Hire an accountant
There’s just no replacement for a professional accountant. Sure, you might think that you’re saving money if you do your taxes yourself. But you could end up spending a lot more if you make an accounting mistake and mess up the job
Accounting isn’t an impossible task for small business owners. These pointers will help you manage your finances painlessly and sustainably. Proper accounting is half-knowledge, half-discipline. Just keep your books updated and accurate, and you’ll be fine