Are you a small business owner frustrated with your messy accounting records? Keeping up with accounting can be tough, and many small business owners don’t prioritize it until they realize how important the data really is for their small business. Sound financial management is the key to growing a business and making better decisions, whether your business is large or small. If you don’t feel like you can keep up with your records, hiring bookkeeping services for small business is essential to ensure success and ensure compliance with government regulations.
Bookkeeping is a necessary chore of all businesses, big and small. It helps small business owners manage operations, plan ahead, and prevent an audit by giving the Internal Revenue Service (IRS) what they need. To keep moving toward your long-term goals and improve profits, follow these proven small business accounting tips.
1.Track Every Expense
It is essential to label and categorize each expense and track your cash flow to ensure you are maximizing tax deductions and write-offs. Cash flow can be a huge problem for small businesses since money isn’t always coming in but usually always going out to pay expenses. Using your business credit cards can help you track expenses, and leave your wallet clean without a ton of dangling receipts. If you are using a credit card, you can even earn cash back on your purchases.
Most accounting software will store copies of checks and invoices that you have already paid. If cash is your only option, filing digital copies of receipts in your software can be extremely beneficial. It is important to remember that whichever accounting method you have chosen will impact when you record expenses and income
2. Reconcile Your Bank Accounts
Reconciling your bank accounts allows you to identify errors in your company or bank records. The sooner you do this, the sooner your business can continue with accurate and up-to-date records which is essential for good business decision making. Comparing each transaction from your bank statements with the same transaction in your accounting records ensures the balance of each account is the same and that there are no errors. Identifying the errors as soon as possible can save your business a lot of time in the long-run.
If you don’t reconcile your accounts properly it can be extremely costly. If your bookkeeping service for small business has to do extra work you will be charged extra in accounting fees. So, save yourself and your accountant some time and reconcile your accounts beforehand!
3. Go Green. Go Paperless!
If you are catching up on your accounting mess, this would be a great time to consider going paperless. Not only is this a great way for your company to go green, but it can also make your life much easier having digital records of everything.
As you are going through transactions, create digital records of receipts, important documents, and other paperwork. We have highlighted some tools that are super useful to small business owners.
Shoeboxed: scans and organizes receipts and can automatically create expense reports from your uploads. It is as easy as that!
FileThis: Prefer using a smartphone? FileThis is a smartphone app you can use to photograph and store receipts, statements, bills, and other documents online.
Evernote’s ScanSnap Scanner: scan and automatically upload all documents to Evernote.
4. Keep Tabs on Labor Costs
Paying employees may accountant for over half of your business’s total budget. Especially in the startup phases, labor costs can account for as high as 70%. It is important to note overtime, perks, and other benefits you offer to prevent over-or-under paying. Payroll taxes are also something business’s must track and account for. Your bookkeeping service for small business or accounting software can help you calculate these taxes, which have different rules and dealings than income taxes.
Did you pay an independent contractor more than $600 for work during the year? Independent contractors have different guidelines than standard employees. If so, you’ll need to arrange and submit the following forms: a Form W-9 and a Form 1099-MISC. There’s plenty of legwork involved in gathering W-9s and filing 1099s. If you’re new to the process and unfamiliar with the deadlines, hiring a local CPA may be the best route for you.
5. Maintain Inventory Records
Theft is a major issue for U.S. businesses, costing them $50 billion each year. This can seriously throw off a business’s books! Avoid misplacing merchandise or theft by noting dates purchased, stock numbers, purchase prices, dates sold, and sale prices. Inventory management software is a business’s best bet to avoid costly mistakes.
6. Follow up on Invoices and Receivables
Sending out an invoice doesn’t ensure you will get paid. It is critical to follow up with vendors or customers that owe you money. This could save hours of time sifting through your revenue account and receivables as well as save you money by overpaying on taxes. Send an invoice immediately following a job to increase the chances of prompt payment, and follow up with friendly reminders as deadlines approach to ensure you get paid on time. Many businesses even offer a discount for early payments, to incentives customers to pay quickly. To help automate the process, accept online payments and use cloud-based accounting software.
7. Create Financial Projections
Even if your business is financially sound today doesn’t ensure that it will be in a year from now. Using financial projections and reports can help estimate where your company will be the following year and even two or three years down the road. They can even help small businesses owners understand where to invest business revenue or whether you’ll need to start applying for a business loan.
Financial forecasting can definitely be tricky, and you must consider how expenses can change due to natural forces such as inflation as well as decisions by your customers. Sitting down with your bookkeeping service for small business or using accounting software is the best way to develop realistic financial projections.
8. Turn to Bookkeeping Services for Small Business
Not everybody needs to engage in professional services. However, you may discover that your business and personal tax situation demands professional assistance. Hiring a professional bookkeeper or accountant, even for just a few hours per week or month, can make a big difference.
Outsourced bookkeeping services will help you keep your books up-to-date and orderly, and a CPA is better equipped to know about potential fees, loopholes, or additional tax deductions for which you might be eligible. Bookkeeping services for small business understand different IRS provisions and requirements and can help maximize your tax advantages and save loads of time. In fact, the average small business owner can bring in about $320,000 in new business annually by offloading accounting responsibilities to a pro.
Finance is the backbone of any business. Small business owners without accurate and timely data often can’t make good business decisions, which can be the ultimate demise of their company. Follow the tips above to ensure your business is financially healthy, and definitely consider turning to bookkeeping services for small business if your books become unmanageable!
Limitless Investment & Capital Small Business Bookkeeping Services
At Limitless Investment & Capital, our CPA’s specialize in turning bookkeeping messes into beautiful, simple accounting systems. We are even offering a FREE financial analysis! Contact us today to get started!