Let’s face it, accounting forms the backbone of any business that’s serious about growth, increasing revenue, and making profits. Besides enhancing accountability in your business, this process provides invaluable insights into the health of your business and its operations. This way, you can easily tell whether your entity is productive or just emptying your wallet with little return to show for it.
Unfortunately, a majority of startups and small business owners hardly give accounting the attention it requires. Indeed, this is one of the key reasons most new businesses struggle to stay afloat with a huge percentage of them collapsing within the first year of establishment.
But it doesn’t have to be this way. In this post, we share five simple tips that will make your accounting as easy as pie. Master them to set up your business for success.
Implement an error-proof invoicing system
Any business that aims at sustaining long-term relationships with its customers must keep records of all engagements it has with them. An invoicing system helps you manages all the sales transactions you make in your business. With an error-proof system, you’re able to bill your clients accurately without overcharging or undercharging them which would offset your business financial health.
There are lots of ways that you can manage your invoices today. A good place to begin is to use a technology-driven solution as these tend to perform better compared to manual and paperwork methods. For example, you may opt for Xero or QuickBooks Online accounting systems that have been proven to offer quality invoicing solutions for years. Besides coming with cloud storage functions, these applications support integrations with other business software solutions including Hubspot, ActiveCampaign, and Salesforce.
Record expense receipts consistently
Monitoring business expense receipts is doable in most business environments, but being consistent at it is the challenging part. To overcome this, consider recording the expense receipt as soon as you receive it. The more you pile up any accounting documents, the harder it gets sorting through the batch when entering the info on accounting books. Besides consuming a lot of your time, these kinds of tasks can become tedious and sometimes monotonous.
A smart way to record expense documents is to take photos of paper receipts. You can then store these images in the cloud using services like Google Photos, Mega, and Dropbox.
Invest in a payroll system
Unless you’re a sole proprietor, it’s highly likely that you have a few people that help you in your business. If that’s the case, investing in a payroll system can prove handy to help you get more organized.
First, this system helps you account for your employees’ salaries and withholdings if any. Moreover, it facilitates adherence to corporate laws which govern taxation and wages across all job groups.
There are two ways in which you can manage a payroll system – you can choose to outsource the function or acquire a payroll software of your own. If you choose the former, you’ll need to hire another company or expert to calculate taxes and other withholdings applicable to your employees’ salaries. On the other hand, you can acquire a payroll software that handles all your accounting work in-house. Whichever technique you choose; your ultimate goal should be to better manage your employees’ pay and taxes.
Prepare profit/loss statements regularly
One of the easiest ways to measure the health of your business at any given time is by creating a profit/loss statement. This document helps to indicate the position of all important accounts of your business including revenue, operating income, cost of goods sold, and the net profit. With this information, you’re able to assess the performance of your business and understand if you’re on the right track or not.
Preparing profit/loss statements regularly helps you enjoy a firmer control over your business affairs which is exactly what you need for improved decision making.
Be extremely cautious with taxes
For local businesses with a well-defined point of sale, the collection of taxes is almost a seamless and straightforward process. However, the same cannot be said of online businesses that operate on virtual locations and serve customers from different geographical regions. If you run the latter business model, it’s important for you to have a sound tax management strategy, lest you find yourself in awful problems with the authorities.
Luckily, there are many ways you can use to improve your tax accounting. For starters, you can add taxes to customer invoices such that they’re always included in the final price of your products or services. Alternatively, you can hire a professional accountant to calculate the proper tax to charge your customers. Lastly, use software such as QuickBooks Online or Xero to make the necessary deductions whenever you’re generating invoices for your customers.
So, there you have it – five ways in which you can improve your business accounting. Which other strategy do you use to manage finances in your business? We’d love to hear your feedback.