Regardless of what kind of small business you own or plan to start you need to stay on top of your accounting. Small business bookkeeping can be a tedious, detail-oriented and time-consuming task but it is essential and necessary. Failing to do so can and will result in unnecessary issues and obstacles down the road that could potentially slow down or even halt your business growth.
1. Set up a Strong System from the Start
When your business is in its infancy, it may be difficult to find the time or energy to set up a full bookkeeping infrastructure. That said, a strong bookkeeping backbone quickly becomes a necessity as your business develops.
It is important to establish a strong small business bookkeeping system as early as possible to save your business time, energy, and money later on. Even for the simplest businesses, invest in small business bookkeeping software, establish a simple chart of accounts, and implement best practices in the beginning. With the right preparation, managing your daily, weekly, and monthly tasks can be a breeze; especially when your business grows.
2. Track and Sort All Business Expense Receipts
Keeping track of business expense receipts isn’t rocket science. It’s staying consistent that is the problem for most small business owners. It’s much easier to adopt a habit that’s easy rather than one that’s complex.
Even if you have good intentions, it’s very easy to misplace paper receipts, causing you to fall behind on your bookkeeping. The expense tracking option in a cloud accounting platform allows you to take a picture of your receipt and safely store it in the cloud. The simplicity of the process allows you to stay on track.
3. Create an Accurate Invoicing System
Having a system in place to keep all of your accounting organized is key, and the more organized you are, the fewer headaches you will have down the line. In today’s technology-driven era, choosing the right business accounting software is very important, and the first step in creating a reliable invoicing process. Small business bookkeeping services can help implement and ensure your invoicing system is working properly and accurately.
4. Set Money Aside For Taxes
A lot of business owners don’t know that the IRS in the US, as well as other governments, require you to estimate and make payments on your tax liability throughout the year. A good rule of thumb to manage this requirement is to set aside 30% of your projected earnings.
You can set it up to automatically transfer this amount into your business savings account on either monthly, quarterly or annually. This may seem like a pain at first, but it’s very simple to set up and ensures you won’t accidentally spend these funds. That way you have the money available when it’s time to prepay the government.
5. Understand Current Tax Reforms
You want to be fully aware of how any changes to the tax laws impact you as it may influence how you manage your finances throughout the year. The most reliable way is to visit your government’s tax website, such as irs.gov in the US, and read through any announcements and changes. Hiring a small business bookkeeper can also help ensure your tax seasons goes as smoothly as possible.
6. Maintain Current P&L Statements
Two of the most important small business metrics are profit and loss. If you are only paying attention to your P&L statement quarterly, then you could possibly be in for a rude awakening. Your P&L statement should include revenue, cost of goods sold, operating expenses, operating income, gross margin, and net profit. These are all numbers you need to know at all times.
“Small business experience surges and dips in sales all the time, and while some things like seasonal sales can be prepared for in advance, there are many factors that are out of the business owner’s control. Keeping an up to date P&L statement allows you to quickly get a snapshot of the overall health of your business at any time,” suggests Roxana Zaman, co-founder, and COO of Maple.
7. Keep your eye on cash flow
When it comes to small businesses, one of their biggest pitfalls remains cash flow. From overestimating future sales volume to impulse spending, locking your cash up in the wrong things can undermine your enterprise. These are only a couple of the worst cash flow mistakes that small businesses make.
When you prioritize bookkeeping you minimize the likelihood of these cash flow problems. Why? Because you have an up-to-date picture of how your business is doing and where there may be potential issues with cash flow. This gives you the ability to adjust as needed. Watch invoices and payments to make sure you’ve got a steady, consistent revenue coming in. Also, pay attention to the expenses you’re paying in terms of when and how much. Additionally, we advice your small business actively saves money for rainy days when customer payments come up short or late.
Bookkeeping represents a chronic responsibility associated with running a successful company. Trying to simplify your bookkeeping requires time and great attention to detail, but it doesn’t need to be a rigorous task if you put a proper system in place. Knowing the right online tools also provides a lot of benefits and will relieve you from manual tedium. Although it takes time to establish a routine, doing so has its rewards in the long run.
Limitless Investment and Capital’s small business bookkeeping in Phoenix
Small Business Bookkeeping in Phoenix is a necessary part of your business, but it isn’t always easy to manage. If you are looking for one-on-one small business bookkeeping support for your company, give Limitless Investment and Capital a call TODAY (1-800-314-0653).