Keeping track of income and expenses is essential, even if you don't own a business. And if you do own a business, things get even more complicated. There are paychecks to issue, taxes to track, and subcontractors to pay out. All of these details are a whole lot less challenging when you hire an accountant to oversee them. However, it is still important to know a little bit about accounting yourself. Dig into the articles on this website, and you'll gain a better understanding of accounting principles, what services accountants really offer, and the benefits of hiring these professionals to assist with your finances.
As a small business owner, you are going to want to make sure that in addition to staying on top of your business, that you stay on top of your accounting as well. Staying on top of your accounting is essential if you want your business to succeed.
Essential Accounting Tip #1: Set an Accounting System in Place
First, you need to set an accounting system in place. You need to decide if you want to use an accounting software program or work with a bookkeeper. Even if you work with a bookkeeper or certified public accountant, they are unlikely to do your books by hand, and they will use some sort of accounting program as well.
You can use an accounting program on your own, or you can hire an accountant to help you with your books. The key is to have a system in place that works for you and that you can stick to.
Essential Accounting Tip #2: Set Up a Process for Dealing with Receivables
You need to make sure that your clients are paying you. Don't just send out invoices and never follow up on them. You need to have a set policy and procedure in place for dealing with invoices. You need to always send out invoices in the same manner, such as the same day of the month, or the day the work is complete.
Provide an early-pay discount for customers who pay their invoices within a set period, such as two weeks. Impose a late fee if a customer doesn't pay their invoice after a set period of time, such as four to six weeks. Having payment policies and procedures in place will help you bring in the money you need to keep your business going.
Essential Accounting Tip #3: Have Business Accounts
Many small business owners make the mistake of mixing up their personal and business accounts. It is not that hard to open a business checking and savings account. Generally, all you need is your business EIN number to open a business account.
Open a business checking and savings account, and overtime, open business credit card accounts as well. Pay yourself out of your business account on a regular schedule just like a regular employee, but don't use your business account for personal purchases. Keeping your business and personal money separate will make it easier to handle your taxes at tax time.
Essential Accounting Tip #4: Keep Track of Expenses
Finally, make sure you have a system for keeping track of expenses. You should have a system for keeping track of both physical and digital receipts that are generated as a result of a business purchase.
You should log all your business purchases into your accounting software on a regular basis. For example, you could set aside an hour each week to log your expenses into your accounting software, or you could hand over all your receipts for the month or the week to your accountant.
When you are running a small business, it is important to stay on top of your finances. You need to stay on top of your finances in order for your business to succeed.
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