Going into business is always a big deal. You’ll never be short of a long list of things to do. New challenges and opportunities to learn will always be around the corner—you’ll probably be analyzing, learning, looking at Wikipedia, and conducting research on a daily basis.
As you run your business, you’ll need to be serious and meticulous, taking the time to properly organize and manage your finances, unless you don’t want to see success. Much like your personal finances, there are a number of different ways that you can organize your small business accounting ins and outs, depending on your aims and ambitions.
To make sure you’re hitting all of your profit margins, consider a number of different things that you can do other than sit down and draw up a small business accounting excel template. We’re going to go through seven of the most important things that you can learn and apply today. Let’s find out more.
1. Income Tracking
We’ll start off with some small business accounting basics – tracking exactly how much both you and your employees make is important; otherwise, you’ll always be out of touch with your business and your goals.
One of the best ways of doing this is to use bookkeeping or invoicing software, allowing you to track what you spend and provide you with insights on what you are spending on. By closely monitoring, you can determine how and when your figures fluctuate. Create profit and loss statements to give you a snapshot of your business’s financial health, summarizing your revenues, expenses, and costs.
You should always include the following information within your statements: your net profit, gross profit, operating profit, and of course, your profit before tax.
2. Audit Your Expenses
Part of tracking your income is about keeping your eyes on expenses. Every entrepreneur has important expenses that need to be paid in order to keep their business going, many of which will prove to be tax-deductible.
You’ll want to check clearly on what expenses you can deduct in order to decrease your taxable income and to make sure that you’re not overspending on unnecessary things.
You won’t necessarily need to keep every single purchase receipt on file but to keep all of your business-related purchase receipts organized. It just helps you be able to make claims in the future. Whatever kind of small business accounting procedures you are implementing, there will always be opportunities to claim for costs that would otherwise impact your profit margins, but you have to be organized if you want to make any claims. Know what you can and can’t claim for inside out—there are ample opportunities to squeeze every penny.
3. Protecting Your Business
Every business will require some level of protection, so you might want to carefully consider purchasing insurance or establishing either an S-Corp or LLC.
By creating an S-corp or LLC, you can separate your business finances and identity from your personal finances. As an example, if you ever had to undergo a legal issue, your personal assets and property would not be liable. If you ever find yourself in a spot of bother, you want to be personally protected from any financial issues that could harm your personal assets.
It’s also important to keep on top of any licenses or certifications that you need to remain compliant with. Upgrades to your certifications and licenses will be a small business accounting cost to bear in the long run.
4. Business Bank Accounts
First things first, you’ll want to set up your own business bank account and get yourself an ERN number or the equivalent depending on where you are in the world.
If you want small business accounting help on this issue, it won’t cost – you can simply call up government bodies such as HMRC and have them walk you through everything you need to know. Far too many start-ups today make a tragic mistake by using personal accounts from the very beginning, but this can have disastrous consequences If things go wrong.
There are several reasons to use a business account from the get-go, including accounting and taxes. One of the most important reasons is to qualify for alternative business loans if you are seeking extra funding within the first six months of your business.
5. Keep On Top of Your Taxes
To be on top of the game, you need to do your research so that you know exactly which taxes apply to your business and what types of tax you’ll need to pay. National insurance, income tax, VAT, corporation tax, business rates, et cetera – make sure that whatever small business accounting methods you want to implement, you’ve researched taxes inside-out to avoid any potential pitfalls. You won’t want any nasty surprises before your deadlines!
Do whatever you can to help you remember when your tax deadlines are. Phone reminders, email notifications – whatever you can. Looming deadlines are certainly stressful but will be much more of a pain if you’ve forgotten something or made mistakes. The key is to keep your records neat and tidy so that you can spend less time searching and more time keeping on top of your accounts.
Small business accounting online software is cheap and available. Third-party software and small business accounting services can help you keep on top of your taxes in an organized manner, allowing you to upload receipts, invoices, and anything you need. They will also tell you exactly how much tax you need to pay and can even print out everything you need to include, showing you the exact places you need to input it. How helpful is that?
Speaking of helpful, did you know that HMRC offers free workshops on taxes? Well, it’s true! Government agencies aren’t always out to get you, so HMRC and government agencies often provide e-learning tutorials, workshops, and helpful information to get you and your company file-in correctly. We’re not saying that you need to go on a small business accounting course, but check in on a regular basis to see if there’s anything they can offer that interests you.
6. Receiving Payments
Part of your small business accounting needs should include considering how you’re going to receive payments. Payments should be an easy and smooth process, and they should be automated as much as they possibly can.
If your service-based business, you may want to invest in third-party software that sends out and organizes invoices with a touch of the button. When selling products, you need to have an online cart completely secure with companies such as Shopify that will prevent any malicious activity.
Always take into consideration exactly what the fees are to find your perfect solution.
7. Schedule Meetings Regularly
One of the best small business accounting solutions is, in fact, to find some time to go over finances regularly, holding meetings with employees if you need to.
It’s incredible how much expenses and income can fluctuate and how much you can learn and adjust from simply talking to your employees. Adding weekly finance meetings into your calendar can help you avoid falling behind, keeping you organized and on top of things.
Falling off the wagon can have disastrous consequences, especially when taxes are concerned.
7 Great Ways to Do Small Business Accounting
We hope you’ll take our small business accounting best practices on board and will Implement them today. Keep anything clear – don’t use the same account for your business as you do for your personal transactions.
Make use of systems and software to monitor your cash flow, keeping everything organized in a tidy manner. Last but not least, remember to schedule time with your company’s employees to keep you on top of things. We’re confident that if you follow our 7 small business accounting tips, your business will never suffer from any financial problems and will run to a T in terms of efficiency.
In your opinion, what is the best accounting software for a small business today? Let us know your thoughts in the comments section below.
Emily Moore is an English & programming teacher with a passion for space and blogging. She believes that current exploration should be focused on preserving our planet’s resources. With satellites circling the orbit, it is easier to get relevant data on any environmental changes. This, in turn, should help people quickly address any challenges.