As a small business owner, you’re usually forced to wear several hats. Aside from being the CEO, you’re the sales rep, marketing manager, HR specialist and, of course, the resident accountant. Here are six small business accounting tips to help get your business in shape to succeed.
These 6 things will set you up for success
Messy bookkeeping and inaccurate forecasting can be disastrous for a small business, where cash flow and resources are limited. Keeping your accounts in order from day one will save you time and money.
- Keep business and personal expenses separate.
- Automate your bookkeeping.
- Prepare a budget.
- Know what benefits you’re entitled to.
- Keep close tabs on your receivables.
- Take a class in bookkeeping basics.
Follow these steps for long-term financial health.
Tip #1: Keep business and personal expenses separate
Top on our list of bookkeeping basics is keeping business and personal finances apart. While it might seem convenient to dip into your business account for personal use (or vice versa) you should always make it a point to keep your accounts separate.
Claiming personal expenses on a business tax return is illegal and may incur fines.
So it’s important to separate expenses. Not only will this make it much easier to track your business costs, it will also be much easier to declare business deductions without having to sift through multiple accounts.
Set a personal and business budget each month and be strict about making sure you keep credit cards and loans completely separate. You’ll be grateful when tax time comes around.
Tip #2: Automate your bookkeeping
It may be easy to track your expenses on an Excel spreadsheet when you’re first starting out, but as your business flourishes cloud-based accounting software is the way to go.
“Cloud-based” means that your data is stored, managed and processed on a remote server online rather than traditional on-site devices. This saves you time and money by avoiding expensive software upgrades, backup costs and hard drive space. It also allows you to record expenses on-the-go from any device.
There are a lot of great options currently on the market. The most popular applications available in Australia include:
- Reckon One
All reduce the time you spend recording revenue and expenses, tracking profits and invoices, paying bills and other important accounting tasks. That’s time you can spend actually doing billable work.
If you aren’t at the stage where you can justify paying for accounting software, Microsoft Excel offers free bookkeeping templates that will help you manage your financial records for the time being.
Tip #3: Prepare a budget
No matter how big or successful your business is, there will always be unexpected costs that appear. What may determine the success of your business is how well you can prepare for the known expenses.
Make a note of any future and expected costs, such as:
- Software or equipment upgrades
- Wages and benefits
- Office supplies
When creating your monthly and annual budgets, make sure you set reminders for when big expenses are due so you can make sure you’re able to cover them without any issues.
This will help your business remain in good financial shape. It’s also wise to plan for a reserve fund, to cover any unexpected expenses such as theft or repairs. By creating a fund for unforeseen expenses, you’ll have peace of mind knowing that you’re prepared for anything.
Tip #4: Know what benefits you’re entitled to
In Australia, small business owners have access to a variety of government incentives.
It’s important you know exactly what you’re eligible for and how to go about claiming these entitlements.
In the recently announced 2019 federal budget, the government has committed to:
- An increase of the instant asset write-off cap to $30,000 (previously $20,000)
- Fast-tracked SME tax cuts
- A $2 billion business securitisation fund
- $57.5 million for small-business tax disputes
- $1 million for electronic invoicing
If you’re unsure about how your business can benefit from these policies, it may be worth temporarily hiring a professional accountant to avoid missing out.
Tip #5: Keep close tabs on your receivables
Cash flow is the most important factor in keeping a small business afloat. It’s vitally important to make sure you keep track of funds owed for your products or services.
To encourage prompt payment, make it a habit to send invoices straight after a job and follow up if payment isn’t made by the specified terms. Every cent counts when it comes to running a small business.
Accepting online payments and tracking invoices and receivables through cloud-based accounting software will allow you to efficiently find outstanding invoices. Whichever payment methods you choose to offer, ensure you have a set process on following up so you don’t let any invoices fall off the radar.
Tip #6: Take a class in bookkeeping basics
If you want to make smart financial decisions for your company it’s worth taking an introductory accounting class. Whether it’s online or at your local TAFE, learning how to manage your funds properly will help you save money and stay in control of your business.
Online education websites such as Upskilled also offer small business accounting courses that are affordable and flexible. You can complete the course at your own pace and gain a solid understanding of accounting fundamentals.
These small business accounting strategies work
Managing the accounts and finances for your small business doesn’t need to be complicated. Even if you’re not a numbers person, learning accounting fundamentals will ensure you have complete control of your business financials. By following these six steps, you can set your small business up to succeed.
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