Accounting is one of the most important parts of running a small business. Unfortunately, so many small business owners leave some of the most critical details of accounting for a time when they are forced to think about them. This can lead to inefficiencies in your business, the mismanagement of finances, and missed opportunities. The following are a few tips to help small businesses owners manage their accounting better.
Record All of Your Expenses
Times can get hectic when running a small business, and it can be easy to lose track of your expenses if you are not careful to record them. For example, monthly costs, like paying your membership fees for your coworking space in Cincinnati or New York might be simple to remember, but one-time purchases or new expenses for things like supplies might be forgotten.
Don’t fall into the trap of believing you will be able to remember to account for expenses later. Instead, develop a system for recording all of your expenses as you pay them out. If you have good accounting software, it might already come with expense tracking features. If not, you could consider any number of expense tracking apps for your phone.
Open a Separate Bank Account
Many small business owners and solopreneurs think that it will be easier to start out using their personal bank account for business. The truth is that this is likely to make things more difficult at tax time and it could even get you in trouble with the tax authorities. It will be much easier to manage your finances when there is a clear line between your personal income and expenses and those that apply to your business.
Follow Up With Late Payers
Many small business owners have to learn how to deal with late payers. In some cases, you may even need to learn how to handle clients or customers who seem like they are not going to pay at all. While you do not want to hassle or harass anyone, you can’t afford to let things go too far. Your business relies on its income, and if it is not coming in on time, that can make it difficult to manage your expenses. Make sure your clients/customers understand the terms of the deal and get your invoices out on time. Additionally, you should develop a strategy for reminding customers of late payments.
Meet Your Obligations
You rely on your customers and clients to pay on time so you can meet your obligations and your suppliers rely on you in the same way. Keep track of your payment obligations and make sure to get your suppliers paid on time. You don’t want to end up with the reputation of being unreliable. After a while, your suppliers might not want to deal with you if they always have to chase you for payments.
Structure Your Business
The legal structure of a business can make a significant difference to your finances. Some may be easier to set up, but there could be options that might offer better tax incentives. It is important to consider the different options that are available so you can select the one that will be the most beneficial to your business.
Accounting might not be the first thing on your mind when you start a business, but these are matters you need to handle early. By taking the time to consider some of the accounting issues, you can increase your business’s chances for success and save yourself a lot of trouble in the future.