5 Small Business Accounting Tips
A small business can only survive if it has the money to continue its operations. And to zero in on how your small business is doing, financial-wise that is, your accounting has to be spot on. Keeping your financial accounts in check lets you know where you should be focusing your resources on. It tells you when or if you can expand to new market niches while still keeping your business afloat or if you should be looking for more outside investors. Regardless, here are five accounting tips that can help small business owners manage the financial health and stature of their organization.
Distinguish Between Personal and Professional Expenses
Having a separate checking account and credit cards for your business will save a lot of time come tax season. Keep in mind that if you declare yourself an LLC, partnership, or corporation, it becomes a legal obligation to open and maintain a separate business bank account. Set up a savings account that can automatically withdraw a portion of each payment so that it gets treated favorably by Uncle Sam.
Track Your Expenses
Collect all your receipts including meals and entertainment, out-of-town trips, vehicle repairs and maintenance, gifts, etc. If you start your small business at home, you can deduct it from your income tax since a part of the house was used for business purposes. This goes the same for mobile phones, internet and telecom services, and even your car. If you use them partly for business operations and errands, you can deduct a percentage of the costs on your tax form.
Use a Bookkeeping System
Accounting software, like Quickbooks, have made it simpler to file for taxes, even for small businesses that have a lot more information and unique circumstances to work with. Alternatively, however, you could go for a traditional bookkeeping system – manually inputting your business finances on an Excel spreadsheet.
Set Up Your Payroll
Even for one-man small businesses, like a web development firm or an eCommerce store owner, you’ll need to hire people at some point. Perhaps you need someone to work part-time to help you out during busy months of the year or a freelance designer to work on your website. You’ll need a payroll system to keep track of the amounts you pay out as well as to be able to deduct a percentage during tax time.
It sounds too obvious of a tip, but a lot of small business owners surprisingly forget to charge their customers. The whole point of starting a business is to make money, and not being able to track your customer invoices and payments can prevent you from ever making any money. Cutting-edge invoicing software, like Wave and Zoho, make it easy for business owners to monitor and manage this information.