As a small business owner you often need to wear multiple hats. One of those hats might be that of the bookkeeper or accountant, or even both (because, the two are separate, remember when we talked about that?). Or you might be free from having to wear that hat by hiring a professional accountant to come over every months to look over your books.
Well, no matter how you are keeping your books and finances in order (and, trust me, you will want to do that, even be a little “obsessed” with it), these 10 small business accounting tips will make your life as a business owner a lot easier.
1. Always Follow up on Invoices
Because if you don’t, who will? Certainly not the customer you’ve sent that invoice to. If you leave it to them, they’ll probably “forget” all about it. Sending an invoice, doesn’t mean that you’ll actually receive payment for it. That’s why you need to follow up on your invoices.
If you are working with paper invoices that could pose a problem when following up. Fortunately, the solution is very easy. Start using an online or cloud-based accounting software which will help you automate this process.
2. Get Everyone to Use the Same Account Numbers
It’s all about consistency here. If you allow every department to use their own account numbers and code invoices as they please, you’ll sooner run out of stress medication than they will of account numbers.
By getting everyone to use the same account numbers you will rapidly increase the entire accounting process and reduce paperwork significantly.
3. Don’t Forget to Track EVERY Expense
Just because it might be “just a few bucks”, it doesn’t mean you can ignore an expense. Whether it’s $2 or $200 or $2000, you need to track, label and categorize every, and I mean EVERY expense you have. Because those things add up faster than you can say Jack Robinson.
But wait a second. Wouldn’t all those receipts be too much paperwork? Not if you use your business credit card, which will also let you earn cash back and rewards (when applicable) on your spend. Neat.
4. Make Use of Lockbox Processing
Lockbox processing can be a lifesaver if you are receiving large customer payments. What it essentially means is that, instead of getting payments to your business address, they instead go to a PO box from where your bank will process those payments for you and then deposit them into your business account.
Not having to manually process every payment will save you a lot of time.
5. Use Separate Coding for Ongoing Projects
If you have ongoing projects, you should think about setting up separate line items. Why? Because if you enter the project cost into your general ledger at a later date it will only lead to processing one invoice twice. You don’t want to do that.
Instead, by setting up separate coding for your ongoing projects, you get clean and easy-to-read reports.
6. Hire a Professional
Look, I understand. You’ve just started your SMB and you think you might be able to save some money by doing your own bookkeeping and accounting. Perhaps you even have a knack for it.
But here’s the thing. You are not a professional accountant or a bookkeeper and very soon your hubris is going to make you pay badly. To avoid this, hire a professional to keep an eye on your books and you in return, you can deal with other stuff. Which are probably going to be more interesting.
7. Use an Accounting Software
There are plenty of reasons why you should consider using an accounting software app like Xero for instance. This will allow you to automate your entire accounting process, plus you can use the full suite of their professional tools and features and that’s not something you can get with your in-house system.
8 Look Better Into Credit Screening
You’ll often be in a situation where you will have to accept credit from a customer. The question is, who should you accept credit from? Certainly not from a customer with bad credit.
You need to perform a credit check before accepting it from a customer. Otherwise, you are running into a risk of not getting paid. The least you can do is screen those customers with a software like Credit Karma and ask for a deposit.
9. Consider Labor Costs and How You Reimburse Employees
One of the biggest (if not the biggest) expenses you’ll have will be paying your employees. Of course, you want this to be fair, which is why you need to keep tabs on any perks, overtime work and benefits you want to offer them in order to avoid either underpaying them and overpaying them.
One big problem here is that, when asking for reimbursement for travel and other expenses they accrue, employees will often send you messy receipts, which may even contain a bunch of errors. Instead, get them to use an automated electronic entry system when scanning their receipts.
10. Don’t Forget to Separate Your Business and Personal Expenses
You know what they say, “separate your love life from your business life”. The same logic applies to your expenses. I hope I don’t have to tell you this, but your grocery expenses do not belong in your business general ledger. Keep these two separate with a high fence.
There you have it. 10 small business accounting tips you should follow as a business owner. If you find only one of these useful, I’ll consider my mission a success.
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