Accounting Tips for Small Business Owners

Creating your own small business might be one of the hardest things you ever do—but we have complete confidence that you can handle it. When you stay on top of your bookkeeping and accounting processes, you empower yourself to make wise financial decisions. With these basic accounting tips for small-business owners under your belt, we’re sure you have the tools you need for living amends scholarship small-business success. Just because you’ve sent an invoice doesn’t mean you’ll get paid. Avoid overpaying on taxes and hours spent sifting through your revenue account and receivables listing by circling back with vendors who owe you money. Send invoices right after a job to increase the chances of prompt payment, and follow up with friendly reminders as the deadline approaches.

1. Keep records of your business transactions for 6 years if you don’t report income and if the income represents over 25% of your return gross income.
2. Few small business owners are accounting experts, but to be successful, it helps to know a little about how to do accounting for a small business.
3. We give you a team of bookkeepers to handle your bookkeeping and simple software for keeping track of your business finances.
4. By hiring a certified public accountant (CPA), you can reduce accounting mistakes and ensure your records are accurate and current.
5. Accounting software, such as QuickBooks, can save you time here by automatically categorizing income and expenses and reconciling your bank accounts and credit cards.

Calculate total labor costs before you hire.

Do an inventory analysis to determine the value of items not sold. If you have to sell inventory for a deep discount, you could deduct it from your year-end taxes. If you check regularly (and compare to prior months’ numbers), it’s easier to make adjustments, so you are neither short nor overloaded. Business bank reconciliation makes it easier to discover and correct errors or omissions—either by you or the bank—in time to correct them.

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US Bank research confirms that cash flow issues are the number one reason for the closure of delinquent account credit card definition almost 82% of small businesses. The failure rate of sole proprietorships is even lower, according to the same study. The day you hire your first employee, you become responsible for payroll tax.

Keep Your Receipts

For any small business, whether it’s an SMB or an early-stage startup, lines of credit are generally not easily accessible, and you need cash to operate. Hence, “follow the money” and closely watch the cash flow statement. The world is littered with small businesses that were making good money on paper but because they did not get paid on time, they ran average u.s. department of state salary out of cash and closed down.

You may also need a minimum opening deposit if the bank requires one. Minimum deposit requirements can depend on the type of business account and whether you’re opening the account at a traditional bank, credit union, or online bank. Andy Smith is a Certified Financial Planner (CFP®), licensed realtor and educator with over 35 years of diverse financial management experience. He is an expert on personal finance, corporate finance and real estate and has assisted thousands of clients in meeting their financial goals over his career.

Having your accounting and bookkeeping in order will help you get external funding or bank financing for major purchases. Whenever there is a major purchase in the offing, a business will need to have adequate cash flow to meet it. Optimizing your inventory management and automating your bookkeeping with dedicated software is essential to safeguard your small business from employee theft. Most reputable accounting software allows you to scan or snap a picture of receipts and other documents using your phone and attach it to the transaction. Bench simplifies your small business accounting by combining intuitive software that automates the busywork with real, professional human support. Letting someone else handle your accounting means you have one less thing to worry about.

Slow-paying customers can impact your ability to pay your own bills, and the earlier you can identify problems in collecting payments, the sooner you can resolve them. Consider sending a reminder the day before an invoice is due or the moment it becomes past due. Setting up a document management system can help with organizing your records so that they’re easier to review. There are different ways to organize files, depending on what you need to store. If you’re using tax filing software, you may have the option to organize and store receipts electronically. Small businesses that are required to pay estimated quarterly taxes but fail to do so may be assessed a penalty by the IRS.

If you’re unsure about your tax obligations, you may want to talk to a professional accountant or tax expert for advice. In addition to automating AP and accurately tracking and balancing your books, cloud-based accounting software can often integrate with your other business software. Sharing data across applications can reduce errors and save the time it would take to manually input data into your accounting software. Popular accounting software like FreshBooks offers all the basic features you need for any business’ bookkeeping. You can check for small business packages that use simple templates for all financial documents.