Don’t assume that you don’t have to optimize your accounting department because you have a new startup. Its bookkeeping capabilities are the lifeblood of your organization. So, by improving its financial operations, even a moderate company can increase its efficiency and boost productivity. Most entrepreneurs aren’t accountants by education. But running a newborn company requires them to learn some rudimentary financial tactics. What are the primary goals of accounting for small businesses? Your initial objectives include paying taxes, keeping clean books, and ensuring the company’s profitability. Here, we’ve provided some instruction on how you can achieve these objectives successfully:
Accounting tips for small businesses
1. Consider outsourcing:
To cut costs, small enterprises should recruit freelancers and self-employed persons rather than full-time staff. Accounting services might get outsourced to professionals with relevant experience. These professionals can spot problems that are sabotaging your company’s financial success. Many companies have started relying upon more freelancers during the pandemic since outsourcing helps them stay competitive.
2. Hire professionals only:
It is a recommendation to hire expert accountants on a long-term basis, either temporarily or permanently. Statistics show that an average company can add over $300,000 in its annual revenue by working with well-qualified bookkeepers. Thus, you should hire someone who has pursued degrees in accounting. Financial professionals who seek an advanced degree in accounting have the chance to succeed in an ever-changing industry.
Over the last decade, online learning has revolutionized higher education. Gone are the days when being physically present on a college or university campus was the sole way to obtain a degree. There are clear benefits to online learning. Whether you’re a student returning to finish your bachelor’s degree or wish to get your master’s degree without interrupting your job. You can easily obtain a degree now. And suppose you want to pursue an advanced degree. In that case, an online master of accounting will be a great opportunity to acquire the right financial skills. Also, this pedagogy adds to their expertise and makes them better accountants.
3. Track every expense:
As an entrepreneur, it’s essential to monitor your expenses and track your purchases appropriately. It would be best if you habitually collected receipts to create a money trail for business transactions. Do you use cash much? Switch to Orderhive- an invoicing and payment software to make these transactions paperless for better monitoring and organizing. Moreover, choose an accounting method of your choice and stick with it. Since an accounting method will dictate how your organization should record its earnings and overheads.
4. Classify your employees:
Don’t make the blunder of misclassifying employees with contractors. Remember that the IRS makes a clear distinction between these two categories. Employees are people with whom you have a long-term business connection; you enjoy financial control over them. But contractors only work for you on a project basis and are independent when making business decisions. The IRS can fine an employer around $1,000 per misclassified worker if the flawed classification was intentional.
5. Open a business account:
We don’t recommend you to mingle your private finances with the business accounts. Don’t throw the revenue generated from your company into a personal bank account. Instead, keep your private and commercial finances separate by opening a business account. So, you don’t have to worry about untangling your expenditures from the business ones. It allows bookkeepers to monitor your company’s progress, too, since financial analyses become less time-consuming this way.
6. Stick to tax deadlines:
Make sure that you know when the subsequent deadline is approaching. Therefore, set reminders for yourself to file your taxes before the deadline expires. Don’t procrastinate filing tax returns until the deadline starts looming over your head and forces you to make errors/mistakes. Since forgetting about the deadline may stress you out and malign the accuracy of your tax records. So, give yourself enough time to “do taxes” or employ the services of a professional for this responsibility.
7. Beware of updated laws:
Beware! Federal regulations are liable to change and get renewed. Since accounting practices don’t remain the same, businesses have to keep up with the latest updates. Is your company capable of following the updated instructions issued by SEC and FASB? Your company must comply with GAAPs – generally accepted accounting principles – too. Compliance with FASB’s guidelines is mandatory if the company expects to survive. Keeping up with legal updates is an ongoing objective for you.
8. Use accounting software:
Several accounting/bookkeeping applications are available online now that help you organize your incomings and outgoings. Leveraging these software programs makes financial management easier for business owners. These online tools have different scalable features – some accessible for free – that allow entrepreneurs to organize their taxes, payroll, budgeting, and inventory. The cloud offers quick integration with business devices as well as error-free information storage and sharing.
9. Invoice regularly:
Ensure that you’re sending only accurate invoices regularly. There’s no escape from creating invoices regardless of how burdensome and time-consuming this process may seem to you as a business owner. These invoices will contain timely, detailed, and to-the-point information regarding your business transactions. Document these invoices carefully and don’t rely on laidback endeavors when it comes to record-keeping. Furthermore, let your accountants handle this troublesome job!
What’s the catch? Well, accurate invoices help you identify customers who are compliant with your instructions and deserve a reward. Also, you can spot late-comers and punish them accordingly.
10. Profit/loss statements:
Corporations release profit/loss statements quarterly to describe their expenses and revenue. Small companies, on the other hand, aren’t legally obligated to release such reports. But P&L statements enable business owners to review their progress and analyze how many business objectives they’ve achieved. They help you realize whether your profit is shrinking or expenses are growing. So, small businesses can benefit from creating P&L statements and effectively reach pre-established goals.
It’s been repeated frequently on different websites that 90% of new companies fail within a year. What is the primary reason behind so many failing entrepreneurs? Statistics published last year show that some 82% of small businesses collapse because of poor cash-flow management. In other words, the failure to understand business accounting didn’t let them get their company off to a successful beginning. So, it would help if you learned the basics of finance to operate an organization successfully. These basics involve tracking your expenditures, paying taxes before deadlines, and keeping accurate records. Also, hire accountants who are well-versed with modern-day finance. These techniques will help expand your company.