10 Advanced Accounting Tips for Small Business Owners
When you’re running a small business, the financial landscape can seem daunting. As a Certified Public Accountant (CPA), I’ve had the privilege of assisting countless business owners in navigating these financial waters.
Advanced Accounting Tips
Today, I’d like to share ten advanced accounting tips that can greatly benefit small business owners, like you.
Digital Tools
Gone are the days of ledgers and pencil accounting. There’s a multitude of software and apps designed to simplify bookkeeping. Platforms like QuickBooks, FreshBooks, and Xero can automate many aspects of your finances, saving you time and reducing errors. Need help implementing or using one of these tools, give me a call.
Reconcile Regularly
One of the top bookkeeping tips I often emphasize is the importance of regular bank statement reconciliation. This means checking that your records align with your bank’s records. Doing this monthly helps you catch and address discrepancies early.
Separate Business and Personal Expenses
Always use a dedicated business account for all business-related transactions. This simplifies tax preparation and ensures clear financial boundaries.
Schedule Regular Financial Reviews
Don’t wait for the end of the year to check your financial health. Schedule monthly or quarterly reviews to assess profit margins, explore cost-saving opportunities, and adjust budgetary needs.
Stay Abreast of Tax Changes
Tax laws can change yearly. As a business owner, it’s crucial to stay updated. Consider subscribing to tax news or scheduling quarterly calls with me to ensure you’re leveraging possible tax advantages and avoiding penalties. All Business has a list of several newsletters to choose from.
Maintain Organized Records
Digitally or physically organized records pave the way for smooth operations. An intuitive filing system makes it easier to locate crucial documents when needed, be it for an audit or strategic planning. See the section below about the benefits of cloud-based files.
Plan for Major Expenses
Upgrading equipment? Moving to a new office? Forecast these big expenses and set aside funds in advance. This proactive approach ensures you won’t be caught off-guard financially.
Keep an Eye on Cash Flow
Positive cash flow is the lifeline of a business. Monitor incoming and outgoing funds vigilantly. If you notice a trend where cash outflows are consistently exceeding inflows, it’s time to reassess business strategies.
Educate Yourself on Financial Statements
Even if you hire an accountant, familiarize yourself with basic financial statements like balance sheets, profit and loss accounts, and cash flow statements. Understanding these gives you a clearer picture of your business’s financial health.
Seek Expert Advice
Sometimes, it’s wise to bring in a professional. Whether you’re facing complex tax issues, planning business expansion, or simply want a second opinion, a CPA can offer invaluable insights.
Example
Consider a small bakery that started selling pastries online during the pandemic. Initially, all transactions were jotted down manually. However, as online orders surged, this system became cumbersome. By embracing digital bookkeeping tools, not only could they automate sales tracking, but they also streamlined inventory management, and more importantly, they were able to identify which products were most profitable. By simply modernizing their bookkeeping approach, they boosted their efficiency and profits.
Benefits of Cloud-Based Files
Obtaining a current and precise snapshot of business performance becomes challenging when a company relies on spreadsheets or traditional paper-based methods for account management. This approach might also allow for mistakes or concerns to slip through undetected, only to escalate into more significant issues later on.
Here are five benefits of cloud-based accounting files.
- Lower Overhead Expenses: Cloud accounting offers a cost-efficient and time-saving alternative, negating the expenses associated with maintaining IT infrastructure. Since all operations occur in the cloud, there’s no requirement for costly hardware acquisitions or hiring personnel to oversee the system.
- Accessibility: Cloud accounting stands out for its accessibility. Unlike on-premise solutions that require physical presence at office servers, cloud accounting lets you access reports, receipts, and transactions anytime, anywhere with just an internet connection and a browser. No software downloads or installations are needed.
- Collaboration: Utilizing cloud accounting enables you and your clients to collaborate in real-time, breaking traditional barriers of time and distance. This enhances productivity by eliminating commuting time and costs. The real-time visibility of team activities strengthens collaboration, fostering a unified work approach and boosting creativity.
- Right-Now Data: When your financial info is stored in the cloud, you can quickly see how your business is doing right now. This helps you make smart money choices for your business. Unlike old-style accounting where you’d flip through many pages to get a report, with this online method, you can instantly see your money details anytime, helping your business grow faster.
- Reduced Risk: Using online accounting systems makes mistakes less likely because all your money details are put in one spot. If you keep adding what you earn and spend and sort them out right, you can get a clear money report anytime. Unlike using something like Excel, where you need to know some tricks and formulas, you just need to keep adding your money ins and outs regularly to get the right report.
Mastering the art of accounting is fundamental for small business success. By implementing these tips, you can ensure you’re making informed decisions, staying compliant, and positioning your business for sustainable growth. Remember, the best businesses aren’t just about the best ideas—they’re also about the best practices.
Need help?
Accounting is one of the several services we provide to business owners just like you. If you need assistance with your books, invoicing and collections, outsourced payroll, or month-end close preparation, book a free consultation today.