6 Tips on Getting Your Small Business Accounting Practices in Order
According to a study conducted by the team at Wasp Barcode Technologies, problems with accounting was one of the major challenges business owners reported having. Making sure the financial aspects of your business are handled properly should be one of your main concerns. Failing to properly manage your finances may lead to you going out of business.
Statistics show that nearly half of all small businesses shut down within the first four years. Improper accounting and money management are some of the leading causes of these small business failures. Read below to find out how to get your small business accounting practices in order.
1. Separate Business and Personal Expenses
One of the biggest mistakes new small business owners make is failing to separate their personal and business expenses. Having a dedicated bank account and credit card for your business is a great idea. By separating these expenses, you can save yourself a lot of time and stress. With separate accounts, you should have no problem figuring out what deductible expenses you have.
2. Track All Expenses
Labeling and categorizing all of your expenses is also something you need to view as a priority. Failing to do this will usually lead to you missing a number of tax write-offs and credits. Using your business credit card for major expenses is wise due to the electronic record it creates of the purchase. Making use of a business credit card will also allow you to take advantage of the rewards and cash back they generally offer. If you prefer to use cash, be sure to use accounting software to make a digital copy of your receipts.
3. Record Your Deposits
Making a detailed record of all of your deposits is also something you need to get in the habit of doing. Neglecting to keep up with things like revenue from sales and other infusions of cash can lead to you paying unnecessary income taxes. According to the IRS, business owners pay around $2.1 billion in civil penalties each year. Steering clear of these penalties is easy with the right mindset and accounting software.
4. Get Some Professional Help
Most business owners who have tried to do their own bookkeeping will tell you it pays to hire an accountant. Unless you have extensive experience with small business accounting, you are bound to make a number of mistakes. By entrusting this work to a professional, you can rest assured all of your financial records will be up-to-date and accurate.
5. Keep Up With Labor Costs
Among the largest expenses you will have as a business owner is your payroll. Keeping track of things like overtime and other perks can help you avoid over or underpaying your employees. Don’t forget to pay yourself in order to avoid tax issues.
6. Plan For Unexpected Expenses
As any business owner knows, unexpected expenses are a common occurrence. Planning ahead for these stressful situations can be very helpful. The last thing you want is to have a piece of essential equipment breakdown and not be able to replace it due to a lack of funds. Creating a rainy day savings account is something all business owners need to do.
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