Running a business is challenging.
You have to look over your product manufacturing, ensure that your employees are appropriately compensated, and promote your business. In addition, you need to keep your business accounting organized.
However, you should not dare cut corners when it comes to your business finances. That’s because taking the high road can be beneficial for your business.
Business Accounting in a Nutshell
Business accounting is all about recording, analyzing, and presenting your venture’s financial information.
Depending on the size of your company, one person or a team of professionals can do your business accounting. Regardless, the purpose of business accounting is to ensure that your venture can stay afloat while doing your due diligence.
When done correctly, you can reap the following benefits:
You can Understand Your Business’s Financial Situation
One of the benefits of having an organized business accounting is having a bird’s eye view of your company’s financial situation. It is like knowing if you still have the resources to spend and where you can spend them.
After all, you need to ensure that your business is financially secure. Otherwise, your company can collapse, and you might end up liquidating your assets.
You can Focus on Other Business Aspects
As mentioned earlier, running a business means you will have a lot on your plate. With the help of your accountant and bookkeeper, you have one less thing to worry about.
That’s because they will be the one who ensures that you are paying your taxes and your employees are appropriately compensated. Meanwhile, you can focus your energy on other aspects of your business.
But what if you cannot hire an accountant and bookkeeper yet? It is normal to do everything yourself at first. However, remember that you should not multitask. That way, you will not be prone to mistakes.
You can Do Your Due Diligence
Of course, you want to organize your business accounting to ensure that you are doing your due diligence. This means paying your taxes entirely and promptly.
However, a business owner has different kinds of taxes to pay. Plus, you need to pay your dues and government fees to operate legally. This explains why you need the help of an accountant and bookkeeper.
For one, they can help you understand the kind of taxes you have to pay and how much. Second, they can help do the work for you.
You can Easily Apply for a Business Loan
When you organize your business accounting, it means that you have a record of your financial statement. This can be handy when you need to apply for a business loan or raise funds from an investor.
That’s because creditors and investors will look at your financial statement. This is to know whether you can pay your loan or it will be a worthwhile investment to fund your business.
You can Save on Operating Costs
This might be something you can’t wrap your head around. However, not hiring an accountant and bookkeeper can be more expensive than you thought.
Sure, these people do not work for free. Still, they can help you go over your books and see where you can save money.
Who knows? You might be able to enjoy a tax rebate based on your operational expenses. These rebates can help you save money, which you can use on other parts of your business.
6 Ways to Organize Your Business Accounting
Business finance can sound like an overwhelming subject. However, keeping your accounting in order need not be cumbersome.
That said, we have listed six actionable ways to help organize your business accounting.
Keep Your Business and Personal Finances Separate
Just because you own the business does not mean that you can use it as your personal wallet. When you do that, your business will go bankrupt anytime. You will also put your assets at risk.
Hence, you should separate your business finance from your personal finances.
One way to do that is to compensate yourself like an employee. Another is to have separate bank accounts for your business and personal funds. Doing so can also make establishing deductible expenses easy.
Track Your Transactions
If you want to have an insight into your business’s economic health, you need to track your transactions. This is where finding suitable accounting software can come in handy.
That’s because it makes recording when money comes in and out straightforward. It also helps automate your business accounting process, from recording a transaction to sending an invoice. Moreover, using accounting software ensures that all your financial records are accurate and in one place.
In addition, we also advise that you spend a day in a week where you organize and review your business finances. That way, reconciling your books at the end of the year will be hassle-free.
Refrain From Using Cash
Unless you only need to use petty cash, we recommend using your checking account for your transactions. That way, tracking your transactions will be easier.
On the other hand, reconciling your cash transactions with receipts can be tricky and time-consuming. As such, make sure that you use an expense form when reimbursing someone’s cash transactions. Doing so can help you accurately record all your business transactions.
Hire an Accountant
Sure, using accounting software means that you can do your business accounting yourself. However, this is only viable if you know the technical jargon. Otherwise, you should hire an accountant who is also familiar with the accounting software you are using.
For one, they can understand the technicalities involved in business accounting. Second, they can help you identify where you can save money. Lastly, you will have one less thing to worry about.
Separate Your Accounts Payable and Receivable
One way to know whether your business is doing well financially is to separate your accounts payable and receivable.
Accounts receivable deals with the amount of money you expect from a client or customers. Meanwhile, accounts payable refers to the money you owe to your creditors and suppliers.
When you separate these accounts, you can easily track whether you need to chase your payments and when you already paid a creditor. Doing so ensures you will have a smooth monthly cash flow.
Review Your Books Often
To make your business thrive, you must understand your venture’s financial health. And you cannot achieve that if your accounting is disorganized.
Luckily, you have accounting software that can help organize your business accounting.
Still, not every tax office would accept a digital copy of your accounting books. That’s why it would help if you could review your books at least once a week. Doing so can also make it easy for you to consolidate them every year.
You may think that not hiring an accountant and bookkeeper can save you money. What you do not know is that skimping on this part of your business can be costly.
Without an accountant and bookkeeper, your business accounting can be all over the place. This will make you more likely to miss paying your taxes. And this can have legal liabilities.
As such, we suggest that you follow the tips listed in this post to ensure that your business accounting is organized.
Gia Keasler is a contributing writer based in NYC. She usually writes about running and funding a startup and how to make it successful. She also do brush pen calligraphy as a hobby.