Small businesses form the cornerstone of the U.S. economy. The spirit of opportunity and entrepreneurship they represent is inherently American.
And, small businesses greatly contribute to the national economy and create jobs that increase employment rates across the nation. Though we don’t always see the effects of small businesses, according to a 2017 profile by the SBA, small businesses in the United States comprise 47.8% of all U.S. employers and employ 57.9 million people.
Business owners often have to wear many hats to be successful. Just starting out, they are required to create business plans, marketing plans, sales plans, financial plans; get loans and investors—and once the business has begun, they must keep up all of those things as well as maintenance, budgeting, hiring, filing Social Security and wage reports. In fact, the most successful owners must keep up-to-date on all relevant business-operating skills.
Though duties vary depending on the industry and business category, all come into play in one way or another. But one aspect must be prioritized above them all to keep the business afloat: accounting. If you are a small business owner or an aspiring one, don’t be intimidated by the math—continue reading for some helpful tips on how to run the accounting side of your business successfully.
Scrupulous records are ideal for ensuring your business stays on track financially. Daily, weekly, monthly and yearly expenses can help you be a proactive budgeter; in fact, by calculating your minimum monthly profit, you can buckle down on essential expenses and work toward earning the funds necessary for your business. An easy way to record transactions is to minimize cash transactions—let the bank accounts keep an exact record of each transaction for future reflection and budgeting.
Keeping accounts separate is a must when it comes to financial organization to avoid money mishaps and mismanagement. Don’t just lump all of your business’ assets together—and especially not with your personal assets. Accounts receivable, payable, borrowed funds and personal should all remain discrete to more easily distinguish what money belongs to whom.
Take Advantage of Technology
Technology can do wonders for your business if you know how to take advantage of it. Start off your business with minimal costs by utilizing the variety of online services available to make managing your finances easy and inexpensive. Automated services and payment options like Square, Cash, Paypal, and Apple and Android pay can make payments quickly and inexpensively, so you won’t have to worry about interest—you can also make these conveniences available for your customers to use, so they don’t miss their payments to you. Invoice platforms such as Freshbooks and Stripe are also an efficient way of managing your business’ earnings.
There is also software available to help you be your own accountant and bookkeeper. Invest in spreadsheet and template programs that provide an easy way to keep track of finances and manage spending, since you can organize and record all transactions, earnings and payments.
Consider Hiring a Bookkeeper or Accountant
Accounting is essential for your business to remain strong and should be prioritized as such. Keeping up with finances is vital year-round, not just during tax season. If doing your own bookkeeping and/or accounting is taking up too much time from your multiple other responsibilities, it may be best for you to hire a professional, even if it’s only part-time. Those with the experience can certainly be worth the expense: they have the know-how to cut costs and get you the best results to maintain your business. They also know what qualifies as tax write-offs and credits to get the most out of your finances.
Make Sure You Get Paid
Perhaps the most obvious thing on the list—getting paid—can sometimes be tricky if your customers believe they can get away with it. Stand strong and insist you are paid what you are owed—after all, you must continue providing your product for other customers. Sometimes calling weekly to follow up on their payments and offering to take their card over the phone is the only thing you can, but by offering incentives like discounts to those who pay on time or with cash, you can make sure everyone wins.
The most important thing you can do to keep up with your accounting is to be proactive. Taking an active role in your finances promises the knowledge necessary to run your business by keeping you up-to-date on the cash flow. Use your records to budget every dollar and you will learn your business’ optimal costs and expenses to best manage your cash flow. With that information, you can schedule your payments around your business’ expected income to take advantage of higher income periods and so forth. Try to have three to six months’ worth of money to support your business in case of unexpected loss.