There’s no lack of details that need to be considered as an entrepreneur. Organizing the basics of small business accounting – costs, expenses and revenue tracking – soon after launching the endeavor will help ensure the paperwork doesn’t pile up and that the cash is able to flow. It also allows the entrepreneur to concentrate on a more important aspect – growing the business.
Costa Rica entrepreneur, successful business leader and philanthropist Ann Marie Puig is extremely familiar with the accounting requirements needed to get a business going. She has a proven track record in finance and business creation and shares nine fundamental tips needed to establish an organized accounting program.
“You can manage your own particular accounting and bookkeeping when you first begin,” Puig. “However, once you’re prepared to file taxes, you regularly come to the realization that you didn’t know enough or would not like to invest enough energy to make sense of it, and that is the point at which I recommend getting an accounting or bookkeeping administration to enable you to augment any duty favorable circumstances.”
Paying someone to administer the books can be overwhelming. Accounting practices can be automated using one of the many software applications that are available, such as QuickBooks, Wave, Xero or FreshBooks. Each has its own specialty, so it’s important to investigate and determine which one will work best for the business.
Isolate Business and Personal Expenses – A dedicated bank account, including credit card and checking accounts, spares you valuable time when deductible expenses have to be calculated. It may be more difficult to set up at first, but it will save major headaches in the long run.
Track every expense. Label and sort each cost, and track income, or you can miss tax benefits and credits. Dollars add up quickly and it’s easy to run out of money. Use business credit cards for purchases in order to not be bogged down later by a wallet that is full of paper receipts. As an added bonus, the credit cards can earn cash back, which can be used to help grow the business. If cash is the only option, make digital copies of receipts and store them in the accounting software.
Record deposits accurately. It’s easy to lose track of the source of money – loans, income from deals and other earned money. This can lead to paying taxes unnecessarily. Accountants can offer the best advice on how to record all of the deposits.
Hiring an expert clerk or bookkeeper, even for a couple of hours each week or each month, can have a major positive impact on the business’s finances. Says Puig, “Using an accountant can help to ensure that the financial records are all in order. The experts know how to maneuver the system, finding unknown fees, tax deductions and even loopholes. It’s also important to have a basic handle on accounting terminology in order to understand tax advantages.” Always hire a professional that can speak in a manner that you can understand.
Always make time to update the accounting books. Discipline is a key component to any successful business operation and time needs to be set aside each week to put the accounting data in order. It will also ensure that receipts and invoices receivables don’t pile up, which will prevent a major dilemma when it’s time to turn in the financials for the company.
Watch labor costs. Make sure that you properly manage your biggest expense – payroll. Review overtime pay, perks and other benefits to ensure that the business doesn’t overpay (or underpay).
Expect major expenses. There will come a time that equipment needs to be replaced and computers need to be upgraded. While there always exists the possibility that emergency situations arise, there are certain things that can always be anticipated and included in an annual budget. Plan ahead to ensure that there is enough cash to cover capital expenses.
Avoid losing stock through misplacement or theft by tracking when items are purchased. It’s also a good idea to keep track of stock numbers, purchase and sale prices, as well as dates that items are sold. “The greater the amount of organization, the more efficient the business will run,” asserts Puig.
Always follow up on invoices and receivables. Sending an invoice doesn’t guarantee that a payment will be received. Always track invoices and circle back with vendors who owe money. This will help the business avoid paying more taxes than is necessary and prevent hours from being lost to track late payments. Accept online payments and use cloud-based accounting software to help streamline the payment process.
Finance is the foundation of any business. Becoming educated on small business accounting practices is a requirement in order for the endeavor to prosper. Says Puig, “When in doubt, turn to an accounting expert to guide you. Otherwise, you’re setting yourself up for failure.”