Accounting is often at the bottom of the priority list for many small business owners; There’s more to managing the day-to-day operations of the business, from obtaining sales.
However, neglecting business accounts can have a serious impact on the business.
This article looks at 5 things a homeowner needs to do to avoid that all-too-familiar accounting mess!
Tip 1 – Open a Dedicated Business Bank Account
Opening a new bank account is very important especially for your business. Using your personal bank account can create confusion for both you and your accountant. A separate account means you can easily identify all your transactions.
While there may be fees associated with opening a bank account (note that many accounts are free for 12 months from opening); While the fees associated with your business bank accounts may be lower compared to additional bookkeepers and accountants, it may be necessary to understand the mix of mixed personal and business accounts.
Tip 2 – Hire an Accountant
An accountant is an essential resource for your business; Because they will ensure that all of your resources are kept in order, allowing you to:
Monitor payments that are due to you Monitor invoices you need to pay File annual declarations on time for tax purposes Prepare VAT declarations
Basically, stay on top of finances. Please don’t fool yourself into thinking you’ll do it yourself; As the owner, you need to focus on running your business and getting new customers; Don’t do books.
Tip 3 – Control your cash flow
Businesses fail because they run out of cash, so monitoring cash flow is of the utmost importance for businesses of all sizes.
This can only be done in an Excel spreadsheet and should be updated weekly; However, you may need to have a cash flow plan 2, 3 or 4 months in advance.
Cash is king, so monitor your cash flow so you don’t run out of cash; Your accountant will also be able to help you with this.
Tip 4 – Check your profit and loss monthly
Even if the cash flow is good and you have money in the bank; The key figure for any business is profit; And if you don’t track your earnings royally, you can lose money and won’t even know the numbers until the end of the year.
Make sure your full charge bookkeeper also maintains monthly profit and loss figures; Because this will help you to really monitor how well your business is doing.
Tip 5 – Use Simple Accounting Software
This will help you and your accountant with all the financial elements associated with running your business on a daily basis:
Invoicing Cash Flow Profit & Loss Purchases and much more…
There’s no need to buy expensive accounting software today, as there are solutions like Xero designed for small and medium businesses starting at just $12 per month.
By putting all of your statistics into software like Xero, you’ll also save hours of bookkeeping, as the software automatically generates many of the relevant statistics for you.
Top 6 – Hire a Highly Recommended Small Business Accountant
Above all other activities (first) there is a need to hire an accountant who has small business experience and who speaks plain English. The best way to find such an accountant, we suggest, is to get recommendations from other small businesses.
Many small business owners have a tendency to ‘defer accounts’, leaving it until the end of the year. Remember though that one of the main reasons you have a business is to make a profit. Keeping a close eye on the statistics will be your way of ensuring that there is always a business focus on PROFITS.
