Handling your business’ finances might seem like a daunting task, but it doesn’t have to be. Here are 4 small business accounting tips to help you get it right.
69% of entrepreneurs start their businesses at home.
If you’re reading this, chances are that’s true for you.
Managing your business finances is different than managing your home finances (even though they may share the same roof).
Here are 4 small business accounting tips to make your life easier.
- Understand Small Business Accounting Principles
Unless you have an education background in accounting, your understanding is probably limited.
To start off on the right foot, spend time learning basic terminology. Doing research in the beginning will make things easier in the long run.
In addition to terminology, make sure you understand important documents associated with accounting. This includes balance sheets, income statements, cash flow statements, and revenue forecast.
Once you have a basic foundation, it’ll be easier to fill in the gaps with supplemental resources.
- Keep Personal and Business Finances Separate
After having a general understanding of accounting, you’ll recognize the need to keep your finances separate.
Depending on your business structure, it also may be a legal requirement to do so. Plus, it’s easier to keep track of revenues and expenses as they occur.
When organizing your business finances, keep track of everything. This is the place to be as detailed as possible.
Create as many categories as needed to organize what you earn and what you spend. These can be transportation, meals, equipment, you name it. The idea is to make it easy to quickly identify revenues and expenses for later reference.
You may decide to hire a professional accountant to keep your business finances straight. While this is a good investment, make sure to assess your other expenses and make sure it’s feasible.
- Don’t Cut Corners But Don’t Be Spendy
For instance, it doesn’t make sense to hire an accountant if you have limited funds starting off.
It does make sense, however, if you’ve allocated funds for an accountant when creating your budget.
Creating a detailed budget and sticking to it is the best way to handle your finances. Account for emergencies, taxes, and unforeseen situations.
You don’t want to cut corners on some expenses, as they will end up costing you more in the long run. For example, it’s wasteful to buy cheap equipment that you’ll have to completely replace within two years.
When considering your budget, think about your needs and desires for your business. Some needs are essential, such as promotion and advertising, while others are simply a desire (like an Audi work vehicle).
- Utilize Accounting Software
You may find that using online software keeps you more organized than only using something like an Excel spreadsheet. A popular program for this is Quickbooks, but there are many different resources to maximize efficiency.
The way you keep track of your finances depends on how complicated or large your operation is.
You could be a small business that has limited accounting information in terms of hundreds of expenses a month. If that’s the case, you could get away with an organized spreadsheet and a paystub generator software (click here to see what we mean).
Trust Your Intuition
Even if you are unfamiliar with small business accounting, you probably know more than you think. If there are areas you’re lacking in, don’t be afraid to find a mentor or do a little bit of research.
Regardless of how you go about organizing your finances, the key thing is to understand your expenses. Read more about how to do that.