For small businesses, accounting is one of the significant factors which can dictate the outcome of the company. However, it is often overlooked since business owners and entrepreneurs focus on the product or service aspect. Understandably, numbers can be overwhelming for most people. And hiring an accountant may take a huge chunk out of the budget.
This article will discuss the importance of basic accounting to your business, and the good news is, you don’t have to hire an accountant, at least not yet.
Running a business without proper financial documentation is like flying a kite without the string. Even the most basic of accounting can do a lot, and if done appropriately, it can turn your business into a thriving venture.
Here are some basic accounting processes you can use now, even if numbers are not one of your strong suits.
- Differentiate business from personal finances. Most entrepreneurs fall into the habit of mixing their finances because it’s convenient. Keeping separate records of these can help you easily track your sales and expenses.
- Make a record of all expenses and income. If you think about it, it’s better to record all your business spending and collections than not writing them down at all. It can be an overwhelming process, but once you get used to it, you’ll find it easy. Without taking account of your finances, you’ll never know if your business is making enough profit or not.
- Control your cash. List all your monthly and annual overhead expenses and set aside part of your earnings for taxes and for your other operational requirements. This is to ensure that you’ll have enough cash to keep the business running as stable as possible.
- Manage incoming payments. Sometimes, there are payments long-overdue from clients, and you forget to follow them up because of other late sales invoices. The best way to deal with this is to send a formal enquiry to your clients if there are still unpaid accounts, and if yes, request immediate payment from them. Closely monitor the terms of payment, and it’s fine to remind your client about them. Having an accurate projection of when payments are coming in can give you the advantage of a contingency plan.
- Utilise accounting software. You need to make use of software where you can list and balance your finances. A good old ledger can do the work, but it’s more convenient with safe and smarter MS Excel or Google Sheets. Take it a level higher with a cloud accounting platform where all of your accounting needs are provided. Also, there are now mobile accounting apps for the convenience of business owners like you. Take time to try any of them and choose the one that works for you.
Small businesses can significantly benefit from the basic accounting tips above. As an entrepreneur, it is not enough that you know how your industry works, but you also need a way to gauge if your business is meeting its financial targets. As your business grows, though, it’s still the best option to hire an accounting team to take care of financial issues.