If you’re an owner of a small business or thinking of starting up, it’s vital you get your accounts in order.
Whilst accounting can be boring and time consuming, it’s crucial you get your numbers right as they’re an important part in determining your business success.
Failing to manage your accounting efficiently can result in unnecessary stress and even the failure of your business. But don’t fret. It really doesn’t have to be as hard as you think.
Here are 5 things to consider when organising and managing your business accounts:
- Decide If You Need Help
First and foremost, be straight with yourself. Many business owners try to cut costs by doing their accounting themselves, and if done poorly, this can cause you a lot of headaches.
If you’re completely baffled with where to start, or your time is wrapped up on operational tasks, hiring a bookkeeper is a wise move.
You could start by hiring someone part time or as a freelancer to keep the cost down and then weigh up your options as you grow.
Accountants have a wealth of knowledge in their profession and can advise on tax laws in their jurisdiction and ways to keep you penalty free – which will almost always save you money.
Outsourcing your accounting also frees up your time to focus on other areas of your business.
If you’re really strapped for cash and have to do it yourself, there’s lots of online accounting software you can use such as Xero and Kashflow to help organise and guide you. You’ll also need to consider the following points…
- Keep Things Separate
Whilst it may have been convenient at the time to buy your weekly food shop on your business card, don’t make it a regular habit. If you’re going to do your accounts properly, you need to personally pay back your business account and record it as an accounting transaction before things get messy.
Your business account should only be used for business expenses and this will save you a lot of time and hassle.
- Track All Your Expenses
In order to manage your numbers efficiently, keep track of deductible expenses and manage your tax return properly, you should keep receipts for every transaction on your business account. If you’re using an accountant, discuss an organised way of regularly issuing the receipts to them. If you’re doing your own accounts create a folder (the old fashioned paper way) and a digital spread sheet on your computer too, and log all of your receipts in date order.
There are five types of receipts that you should pay extra attention to:
- Meals and Entertainment: Conducting a business meeting in a cafe or restaurant is the norm these days but be sure to document it well. On the back of the receipt, record who attended and the purpose of the meal or outing.
- Out of Town Business Travel: The ‘tax man’ is wary of people claiming personal activities as business expenses. Keeping your receipts provides a paper trail of your business activities while away.
- Vehicle Related Expenses: If you’re on the road a lot and need to pay for fuel or car insurance, make sure you record where, when, and why you used the vehicle for business.
- Receipts for Gifts: If you want to treat your best customer with a gift like tickets to a concert, it matters if you attend the event with the recipient or not. If you do, then the expense would be categorized as entertainment, rather than a gift. Note these details on the receipt.
- Home Office Receipts: If you work from home, you need to calculate what percentage of your home is used for business and then apply that percentage to home related expenses.
- Chase Up Payments
As obvious as this sounds, many small business owners do not properly track invoices and payments from customers. If you don’t keep on top of what’s owed to you, it could be months before you realise you have outstanding invoices at which point the repercussions could be fatal for the business. You need to track all deposits and balances, received and due, clearly.
Keep a note of any customers that tend to take longer to pay. If you forget when things are due, you can set yourself reminders on your phone or Google calendar to refer back to your spread sheet and chase them up.
For more help you can read our blog on effective business communication here.
- Re-evaluate Regularly
Even if things seem to be going well with your business, it’s important to analyse your accounting methods every now and then. As you grow, it’s good to continually assess the amount of time you’re spending on accounts (if any) and how you could make things even more efficient and profitable for your business.
The right bookkeeping solutions, be that yourself or with an accountant, means you can invest more time into the day to day business tasks and potentially save money.