It’s important to be very cautious when you are starting a new small business and are trying to undertake all of your accounting duties properly. It may seem easy at first, but there are so many little details that can sneak up on you over the course of a year that when it comes time to make your tax payments, the slightest lack of organization can get you in trouble, or a lack of essential foreknowledge can prevent you from taking advantage of all the credits or deductions available to you.
Hiring an accountant can put too much strain on a young small business, so start by using software. When deciding what program to use (Xero, Freshbooks, Quickbooks, and Wave are all good examples), think carefully about functionality. Do you want cloud support that allows you to work on a mobile device and computer? Do you want iOS or Android support? Other than that, here are some tips to get your small business accounting quickly in order.
If you deal with a lot of receivables, set up online payments. This gives your clients the ability to automate their payments, and it’s easier to remind them about upcoming or missed payments via email than through phone calls and letters.
Rigorously set aside time every day or at least once a week to get all of your finances and accounting in order. This will save you from long, grueling days and nights when tax season rolls around.
Get a separate business expense account. It’s horrifying to try and sift through statements and determine what are personal and what are business expenses, especially if you wait until a payment is due.
A special trick for small business accounting: annotate every expense. You might miss tax credits or write-offs if you can’t determine exactly what each expense was for. Try to only pay with a card, but if you pay with cash, make sure to upload a digital receipt so that 100% of your expenses are accounted for.
Carefully study your labor costs. If you lose track of overtime and perks, it’s easy to over or underpay your employees – a serious problem that can come back to haunt you later.
Lastly, don’t be afraid to occasionally hire a professional bookkeeper about once a month. While you may have the skills to keep your small business accounting very organized, a professional is privy to more loopholes and tax subtleties and can find clever ways to help you save money and help your business thrive.