What's more frightening than a small business owner not knowing or understanding their financials?
Nothing. There is nothing more frightening. These accounting tips will remove that fright!
With it being spooky season, what better time than the present to chat about accounting for your small business? I've seen it time and time again. Business owners arrive to get their taxes prepared, and they are blindsided by an amount owed to the IRS.
Staying on top of your accounts payable, accounts receivable, your budget and using the proper accounting software is vital to running a financially successful business.
After being in the accounting world for over a decade, I've seen it all. Therefore, I've compiled a list of 5 accounting tips for small business owners.
Separate Personal and Business Finances
One of the first steps in managing small business finances is to keep business and personal finances separate. Open a bank account dedicated to your business transactions. This does four things for you and your business:
Simplifies bookkeeping
Ensures accurate financial reporting
Makes tax preparation easier
Assists you in being prepared, should you ever be audited
*Use business credit/debit cards and keep all business expenses clearly documented.
Stay on Top of Invoicing and Accounts Receivable
Timely invoicing is CRUCIAL for maintaining cash flow. Set clear payment terms and follow up promptly on unpaid invoices. I recommend using invoicing software that tracks payments and sends automatic reminders. Managing accounts receivable efficiently helps prevent late payments and keeps cashflow healthy.
"Timely payment is an essential ingredient to a long-term, successful business relationship. Invoicing promptly is not just about getting paid faster, it’s about showing professionalism and fostering trust with your clients." — Harvey Mackay, Businessman and Author
Track and Deduct Business Expenses
Keep detailed records of all business-related expenses, such as office supplies, travel, meals, and equipment purchases. These expenses can be deducted from your taxable income, reducing your overall tax liability. Use accounting software to categorize expenses and scan receipts for easy record keeping.
*Being aware of which expenses are deductible ensures you're not missing out on common deductions like home office expenses, mileage, or equipment depreciation. Our website has free printable trackers for each of these categories! Check them out!
Set Aside Money for Taxes
So many small business owners make the mistake of not setting aside enough money to cover their taxes. Avoid this common slip-up by regularly calculating how much you owe in taxes and set aside a percentage of your revenue to cover that expense. You may also need to pay quarterly estimated taxes to the IRS to avoid penalties,
*Work with an accountant to ensure your figures are correct, and you're setting aside the correct amount.
Use Accounting Software
Secure accounting software can automate tedious tasks like tracking expenses, generating financial reports, invoicing, and reconciling bank accounts. Accounting software, like QuickBooks, provides real-time insights into your business's financial health and simplifies tax prep. It also helps you stay organized and avoid manual errors.
*Be sure to choose a platform that fits your business's size and complexity. You will also want to be sure it will integrate with other tools or platforms you use.
Accounting doesn't have to be frightening.
Stay organized.
Stay deligent.
Stay informed.
Or......schedule an appointment to become an accounting client at Aue And Company!
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