Even small businesses need to focus on managing their finances. In most cases, small businesses barely last in the market before they close down. Why? The main cause is the lack of finance management. However, businesses and startups that focus on accounting are more likely to stay in business 10 years down the line. So, adhering to the best finance and accounting practices is the key to resolving issues with cash inflows and outflows. That being said, we have some of the best accounting tips for small businesses that can help your startup grow. Read on to find out what they are.
Top 5 Accounting Tips for Small Businesses and Startups
Here are some finance management tips that might be of value to your business:
1. Separate Your Personal and Business Expenses
If you’re a business owner, one of the first things you must do is separate your business and personal expenses. Do not throw your business income into your personal account. If you do, finding one particular transaction among the long list of cash flows occurring from your personal account can be no less than a headache.
So, start by making a new account where only business-related transactions occur. It helps make your business finances stay more organized without muddling with personal finances.
2. Plan All Major Expenses
Many small business owners do not plan for expenses over the long term. This is a mistake that leads to them shutting down early. But you can easily get through a rough patch when you plan for the next 1 to 5 years ahead.
Think of all the raw materials, upgrades, etc., that you might need in the upcoming years. You should also factor in the seasonal ups and downs your business might face, depending on the type of product or service you offer. Doing so will allow you to decipher how to spend money during the highs and lows of your business. Consequently, you can make the upgrades accordingly and save money for rainy days.
3. Opt for a Bookkeeping Software
The process of tracking and organizing all cashflows (incomes and expenses) is called bookkeeping. In finance management, bookkeeping is a core element. It allows business owners to gain all the information they need to make the best decisions for their businesses. While it may sound challenging, bookkeeping software can make the job easier.
The software automates all tedious tasks that are more prone to errors and time-consuming when done manually. Plus, the accounting software allows you to find all the relevant information needed for completing business-related financial statements.
Typically, small business owners find cloud-based accounting software, such as Sage, to be beneficial for them.
4. Keep Accurate Records of All Transactions
Keeping an accurate record of all business-related transactions is essential. Whether you use accounting software or an excel spreadsheet, record-keeping is crucial to prevent unnecessary tax implications.
If you cannot account for the deposits, you might be charged taxes on money that doesn’t fall into the income category.
5. Keep Tax Money Separate
When you start a business, regardless of its size, taxes are inevitable. If your business has unpaid taxes, the CRA might charge you with penalties and interest. So, one of the best accounting tips for small businesses is to set some amount aside each month. It will ensure you’re not out of money when the time comes to pay your taxes.
Final Words
Finance management is a core component of every business, be it small or large. Follow the tips mentioned above to ensure your business continues to flourish with each passing day without running into financial pickles. And if you need more in-depth knowledge about accounting, Brookes College offers an accounting diploma that can help.
From personal taxation to the cost and managerial accounting, we offer a detailed program that helps students learn the core principles of accounting. Call us at +1 403-800-6613 to learn more about our accounting program.