One of the primary factors behind the success of small businesses and startups is the proper management of finances and the allocation of a dedicated accountant. Startups and small business owners already have too much on their plates. Thus, they should not add accounting to their daily tasks as it will only contribute to more pressure and stress, and they will consequently lose focus on other dominant aspects of their business.
According to a recent report by the Bureau of Labor Statistics, a mere thirty percent of startups and small businesses manage to stay afloat in the industry for 10 years after starting. This is why you need to adhere to the best accounting practices to prevent cash flow problems, the main cause of countless businesses’ downfall.
Moreover, proper accounting management also provides helpful insights that can be utilized to upgrade your small business. We have prepared a list of useful accounting tips for small businesses and start-ups so that you can operate your business smoothly without any hurdles. Keep reading to learn all our accounting tips.
Useful accounting tips for startup and small business owners
Accounting tip 1 – Separate professional and personal bank accounts
The first step after launching your business is making a separate business account to keep personal expenses separate from your business expenses. There are many advantages of doing this. For instance, you can track and manage your business activities better. You can avoid unnecessary confusion and issues during tax deductions. A business bank account helps to create a more legitimate and professional outlook. The cash flow can be managed conveniently. Moreover, this also helps to keep the money in your savings account secure.
Accounting tip 2 – Make a Budget plan
The next step after launching your small business is to develop a budget plan. This means that you need to come up with estimated expenditures and revenue projections. This will establish a benchmark that you need to attain and thus take steps accordingly. After this, you need to compare your actual expenses and revenue to track your growth. A proper budget plan will help you allocate necessary resources, fulfill certain business objectives, and make plans for the future to avoid any issues.
Accounting tip 3 – Business Record keeping is a must
Record keeping is one of the most essential parts of a small business. You need to manage accurate business records. This might seem hectic for a manual job so you can shift to an accounting software that automates the entire process and thus eliminates any scope of error. Speaking of records, some of the most important documents that you need to store include gross receipts, business expenditure amounts, and fixed assets. A gross receipt is basically the money you earn through your business. Expenses include the cost incurred on your business to operate it. Lastly, Fixed asset records need to be maintained to evaluate yearly annual depreciation amount and the profit or loss on selling them.
Accounting tip 4 – Try Accounting software
Accounting software is the best alternative in case you have failed to get an accountant for your company. This is because cloud-based accounting software automates almost the entire bookkeeping process that in turn reduces manual effort and errors. Besides this, it has many other advantages. For example, it minimizes paperwork, thus saving your money and time, generates financial reports instantly, makes the payroll process simpler, and provides accurate reports which in turn help to make better decisions.
Accounting tip 5 – Develop Profit and loss statements
Developing profit and loss statements are used to track the expenditure and revenue earned by the business during a financial year. This is essential to figure out if it’s ultimately making a profit or loss. It also helps to tally your business cash flow records, identify indirect and unnecessary expenses and manage them, and evaluate the gross profit, operating profit, net profit, and the profit earned before tax deduction. It also helps to make plans for the future to increase revenue.
Accounting tip 6 – Make Investments at the right time
You can identify the right time for making huge investments by thoroughly tracking your business expenditure and revenue. This will also help you prepare the money you need for investing. Here is where the role of a business credit card comes to play. It helps to build a credit history of the business which improves the chances of qualifying for a loan. Being able to secure these loans is very important to improve the company’s financial health.
If you implement proper accounting strategies from the start, your small business or startup has more chances of sustaining and becoming successful in the industry. Many studies have shown that the more frequently a small business analyzes its financial numbers, the better its financial health becomes. This is the key to long-term success. Understandably, bookkeeping might not be a strong passion for most startup and small business owners. However, reviewing financial metrics is important to identify and capitalize on every opportunity so that your business continues to grow.