Owning a small business is no small task. It takes a lot of vision, dedication, and hard work just to get a business off the ground. It takes more to keep it running smoothly and make it profitable.
While your business model and marketing plan are two extremely important aspects of being a successful business owner, you can’t take your finances for granted. If you’re not actively accounting for every incoming and outgoing dollar, you may find yourself in trouble down the road.
Keep reading for our top five small business accounting tips designed to keep your finances where they need to be and avoid any nasty surprises in the future.
1. Separate Your Business Finances From Your Personal Finances
If your personal and business finances are intermingled, it needs to be separated as soon as possible. The more your personal and business expenses are woven together, the more difficult it will be to file your taxes, account for earnings/expenditures, find tax deductions, etc. This also makes it difficult to get a clear understanding of how your business is performing.
Separating your finances is one of the most important small business accounting tips, and here’s how you can do it:
- Make sure your business is official and licensed
- Open a business checking and savings account
- Officially pay yourself a salary
- Keep all business receipts separate
- Keep track of shared expenses and any personal items or assets used for the business
2. Educate Yourself
Next, you need to be as knowledgeable as possible when it comes to managing your finances. Did you know that nearly half of small businesses fail within the first five years?
Talk to an accountant or tax attorney about the proper way to pay taxes as a small business owner. Also, get as much advice as possible about how to save on taxes, utilized tax deductions, and track everything that’s important for filing year-end taxes. You should also meet with a financial advisor to further understand how to optimize your costs, savings, and expenditures.
3. Learn How to Use QuickBooks
Another one of the most vital small business accounting tips calls you to be as thorough and fastidious as possible when it comes to your finances. Every single dollar earned and spent needs to be accounted for and recorded.
We highly recommend investing in QuickBooks training to learn how to use one of the most efficient software accounting programs designed for business owners, accountants, and financial advisors/managers. Learning how to use QuickBooks will make your life much easier.
4. Keep All of Your Receipts
As a small business owner, you also need to ensure you’re keeping all of your receipts cataloged (both printed and electronic). Make sure you have evidence of all of your expenditures, as they will be vital for year-end tax preparation. You’ll also need those receipts if you ever face a tax audit by the IRS.
5. Don’t Fall Behind
Staying up-to-date on your records one of the most important small business accounting tips to help you keep your sanity. Depending on the size of your business, you could accrue hundreds if not thousands of expenses during the year. Imagine trying to organize it all at once.
Instead, we suggest setting aside time at least once or twice a month to record and organize your receipts, expenses, bills, earnings, etc.
Want More Small Business Accounting Tips?
If you’re looking for more advice and information on how to successfully run a business, be sure to check out more of our articles before you leave. We have everything from small business accounting tips to marketing advice, feel free to take advantage of all the information we have to offer!