There are a lot of things to think about when it comes to running a small business. Obviously having a good business plan and marketing strategy helps. But what about the financial side of the business? You need to be good at keeping on top of all the accounting tasks such as managing debt, invoices, and expenses. Below are five crucial accounting tips for small businesses.
Bookkeeper or accounting software
There is a lot of software available to help you manage all of your accounting. Do not feel that you have to do everything yourself. If you are unsure of which type of accounting software to use, you may want to hire a bookkeeper who can do the day to day accounting tasks for you. Hiring a professional bookkeeper or accountant will ensure that you are not making mistakes and that you are recording everything in detail.
Separate payments received from borrowed funds
As a small business owner, you might have had financial backing in the form of a loan. This loan would have been used to boost marketing campaigns or anything else that was needed to kick start your business in the beginning. Therefore, you need to be clear that your loans do not appear in receivables. Make sure that your bookkeeper or accounting software (if you have decided to use it) separates your income from any borrowed loans so it is clear as to what you must payback.
Make sure your clients pay balances on time
There is nothing worse than having to chase clients for outstanding invoices or regular payments. Set out your payment terms from the start and insist that payment is prompt. The receivables column is vital in keeping your business running. Regularly review your billing process as well as ensuring that if you are using any invoicing software it is all up to date.
Manage business expenses
As a business owner, you need to keep a detailed record of any expenses that you or your employees submit. Try to find a regular time when expenses can be submitted instead of trying to calculate them every week or as and when someone submits an expense form. By calculating things on a set day, for example, you will have a better understanding of where your finances are each month.
Calculate a minimum monthly profit
Turning a profit is why we are all in business but running the numbers can get confusing. The best way is to implement a system of expenses and recurring payments so that you know what the minimum income is that you need to turn a profit each month. Income is the easiest way to put a strict target on what you need to earn. Without that financial goal in place, your accounting will become confusing and it can put a strain on your business.