Accounting, especially business accounting, is not just about making complicated calculations and counting profits. It is a process that involves many decisions, ultimately resulting in a numerical value on your startup’s financial documents. From realizing you need to make a financial transaction to determining the most effective mode of payment, to remembering to take a receipt, and finally storing the receipt and making a note of the amount paid, accounting is a habit that one should cultivate through practice.
Six Accounting Tips for Entrepreneurs
As entrepreneurs embarking on business journeys, accounting can be a daunting task. But good accounting habits go a long way in reducing your financial anxiety and keeping finances streamlined. The best part is, you don’t need to be a CPA to inculcate good accounting habits. Here are some easy and practical accounting tips that can keep your financial life in shape.
Maintain a Separate Bank Account For Business Transactions
Although this isn’t a legal requirement for small businesses, keeping your personal and business bank accounts separate is the #1 rule for good business accounting. Sooner or later, when your business grows, you will have to separate the two. So why not do it right from the beginning? A separate business account will give you a separate credit card for business expenses, certain benefits that are only offered to business accounts, and an individual record of all your business transactions.
All this will come in handy during tax season, saving valuable time that would otherwise be wasted on segregating business expenses from personal ones. Moreover, a dedicated business account also contributes to building a good brand image and a credit score for your business.
Not only will it keep your business finances streamlined, but it will also help organize your personal finances. You will have a clear record of how money is being transferred from one account to another, whether your personal savings are being used as a loan for the business or your business funds are being used for a personal emergency.
Organize and File Your Business Receipts
Tracking down lost receipts can be frustrating, especially during tax season. Failing to maintain proper accounting records will leave you scratching your head about where the receipts are, what they are for, and when they were paid. Not only will you lose valuable time in trying to remember it, but you will also lose out on potential tax deductions or benefits.
Instead, duly collecting, organizing, and storing each receipt for business expenses will save you a significant amount of time and anxiety later. Categorizing each receipt under main heads, such as meals and entertainment, transportation costs, fuel costs, and gifts, will further help you understand where your business is spending more and identify cost-cutting opportunities. Now, with many digital tools available, you can scan or take pictures of receipts, which are then automatically categorized and stored on the cloud.
Apart from the bookkeeping and tax aspect, keeping bills and receipts organized can help you as an entrepreneur in various ways. They can help you track a particular vendor, act as a reference for reordering, apply for government grants, sell an asset, or even serve as proof of payment if the need arises.
Setting up An Invoicing Process
Invoices act as documentary proof of services provided by you and your income. Hence, keeping invoices safe and organized is extremely important for any business. Fortunately, even invoicing is now automated, making it easy to send out bills and reminders for payment. Moreover, an efficient invoicing system helps keep your payments coming in, which in turn ensures a smooth cash flow. And as you well know, a good cash flow is the lifeline of a healthy business.
Studying your invoices can also help determine the revenue earned per client. This information comes in handy in case of supply shortages; at such times, you can decide which loyal clients are to be given priority over those who pay late.
Reconcile Bank Accounts With Business Ledgers
Bank reconciliation is your very first round of internal audit, in a way. By regularly cross-checking all your books of accounts with your bank statements, you can flag any suspicious entries, errors, or omissions in your business accounting. Not only does this help manage cash flow, but it also plays a significant role in identifying potential fraud in the business. If not weekly, at least a monthly reconciliation of your books of accounts, and customers’ payments to their invoices, can help you spot any missing or doubtful transactions before they get buried under a load of transaction entries for the entire year.
Pay All Business Taxes on Time
Another good accounting tip or mantra for entrepreneurs is to pay your business taxes, including advance tax, GST, and any other applicable taxes, on time. A practical accounting tip to ensure you are never late in paying these taxes is to create a tax reserve: for every amount that your business earns, keep aside a certain percentage for tax. Most importantly, never miss your deadlines. A late tax filing could result in heavy penalties or late payment interest, which can adversely affect your business finances and cash flow. So, be regular and timely with tax payments.
Seek Professional Accounting Help
While the above accounting habits can improve your efficiency by keeping you organized and updated, you still need a professional accountant. Accountants do more than prepare financial statements; they automate most daily transaction reporting by setting up accounting and payroll software, establishing a system for reporting expenses and income in the correct categories, and conducting timely audits of the system and software for any deviations or changes in business or tax regulations. While you may feel that accounting is only for the taxman, an accountant can help your business in many ways.
A professional accountant can help you stay updated with your business finances, cash flows, debt, and accounts receivable. These data points on your fingertips can help you make informed decisions. Without this information, running a business is like driving a car with a blindfold on, relying on instinct.
Contact Ford Keast LLP in London to Help You With These Accounting Tips
Talk to a professional accountant to help you prepare all the necessary information needed to file simplified or documented claims. At Ford Keast LLP, our accountants and bookkeepers provide services that include preparing financial statements and offering valuable financial insights. To learn more about how Ford Keast LLP can provide you with the best accounting and bookkeeping expertise, contact us online or call us at 519-679-9330.
