As a small business, it’s essential to make sure that you do the little things right to ensure that you keep up with your larger competitors.
While a larger business may be able to overcome the occasional operational or accounting mistake that may lead to lost business or resources, each customer or client for a smaller business is very important to their overall success.
Here are six tips to help improve your accounting.
1. Track Every Expense
It’s crucial for your business that you keep track of every expense — whether it’s a big one like the cost for materials or a small one like gas from driving to and from a job site. Not only does doing this help you maintain an extremely accurate accounting book, but you’ll also be able to handle any audits that may come your way during tax season.
For more information on how to best keep track of your receipts to maintain a good record of your expenses, take a look at this past blog. We break down the best ways to organize your receipts to make your life easier.
2. Be Conscious About Spending
Every now and then it’s a good thing to remind yourself to be mindful of your expenses and how much you’re spending on a day-to-day basis. While this tip is more concerned with the financial side of your business as opposed to the record-keeping side of things, there is obviously a direct link between finances and accounting.
Every month you should be going through your monthly expenses to see where you’re spending the most. And, if you notice that those expenses are a bit too high for your liking or are cutting into profits too much, see if you can find any that are expendable.
For example, if a small business saw that they had a lot of expenses for travel, they may look to cut down on those until sales increase.
3. Avoid Mingling Your Personal Finances With Your Business Finances
This is a mistake that many small business owners tend to make. While it may not sound like the worst thing in the world, you may be making yourself more liable to issues that may come up later down the road (read more about the importance of becoming an LLC or corporation here).
The benefits of keeping these two types of finances separate are expansive and include:
- Make it easier to accurately track your cash flow
- The ability to maintain accurate records when tax season comes around
- Simplify forecasting long-term financial performance
- Provide sufficient evidence of your business’s success to an investor or lender
4. Ensure the Accuracy of Your Records
When it comes to maintaining accurate records, you should use a journal, ledger, or some sort of online electronic record-keeping system. The IRS recommends that you record your transactions with one of those three options. Once again, this will help you make better decisions financially, as well as help you out when it’s time to file taxes.
The IRS also suggests that when it comes to keeping up with your small business’s accounting, you should maintain the following:
- daily and monthly summary of cash receipts
- depreciation worksheet
- business checkbook
- check disbursements journal
- employee compensation records
5. Regularly Review Your Records
Auditing your own books every now and then isn’t a bad idea. You can also bring in an outside accountant to look over your accounting information to ensure that everything checks out.
Many times, accounting errors for small businesses are accidental. But, that doesn’t mean you won’t get penalized for them. So, it’s worth checking and double-checking your books to ensure that they are correct, accurate, and up-to-date.
6. Use Software to Automate and Make Your Life Easier
Here at 24hr Bookkeeper, we are huge proponents of using QuickBooks as your software of choice to help you tackle your accounting needs — particularly QuickBooks Online (QBO).
By choosing QuickBooks Online, you can take advantage of the following features:
- Bank and credit card transactions downloading nightly
- No need to backup your data, as everything is secure on Intuit servers
- No software or local data to manage
- Better shared access with your information for employees and accountants
- Have multiple windows open at the same time (which seems like a small benefit but can really help with your accounting productivity and efficiency)
Start Implementing These Accounting Best Practices Today
By taking the time to implement these tips into your small business’s accounting (if you haven’t already) you can better set your company up for success down the road. Again, make sure not to forget about the little things if you want to see continued success.
If you need some help organizing and managing your accounting, we can help! We can help you with construction software integration to QuickBooks, updating your financials, advising you on your workflow, and handling your monthly bookkeeping.
