Regardless of the size of your business, having efficient accounting practices in place is essential to your success. Without the right accounting processes, you won’t be as profitable as you could be, and you may even find yourself subject to penalties. When you have a small business, establishing appropriate accounting practices can seem like a daunting task. Below are some tips to help you get started.
1. Distinguish between business and personal expenses.
Small business owners are often tempted to mix personal and business expenses for the sake of convenience. However, this can lead to problems with accounting. To simplify accounting, always keep your personal expenses separate from your business expenses. The best way to do this is to open a separate bank account and use separate credit cards for all business-related transactions.
2. Keep detailed records.
Without detailed records of every business-related transaction, accounting becomes much more difficult. Remember to keep a record of every sale, as well as receipts for every business expense you incur. You should also keep careful records of deposits, as well as your inventory. All of this information will be invaluable to your accountant, whether you employ accounting staff in-house or outsource your needs to a third-party company.
3. Establish a bookkeeping system.
In order to keep track of all of the detailed records you collect, you need an effective bookkeeping system. You can set up your own bookkeeping system in-house with the help of computer software programs, or you can hire a professional bookkeeper to handle these tasks for you.
4. Establish a payroll system.
If you have employees and/or you work with independent contractors, you will be issuing payments on a regular basis. To ensure that these payments are accurate, timely and in compliance with all applicable laws, you need to establish a payroll system to handle them. As with bookkeeping, you can establish this system on your own or you can outsource it to a third party.
5. Get professional help if necessary.
Some small businesses are able to handle all of their accounting needs on their own. However, if you don’t have staff trained to deal with accounting processes, or if your staff members simply don’t have enough time to add accounting to their to-do list, it is best to rely on a professional. Accounting is one of the most important aspects of your business’ operations, so you need to be sure that it is being handled properly. Although you will need to pay for professional help with accounting, many small businesses find that outsourcing their accounting requirements can save them money in the long run.