6 tips for small business accounting & bookkeeping
Small business owners know how important it is to keep an accurate set of books. After all, if you don’t have real-time insights into your financials, you’re essentially flying blind when it comes to making important business decisions. But not every small business owner has a passion for accounting. To grow your business and accomplish your strategic goals, you need to refine your accounting operation to enable better data visibility and financial performance. Here are the top six tips for improving your accounting and bookkeeping operations.
1. Set up the right accounting features
To achieve solid business financials, you first need to evaluate the right set of accounting features. There are actually nine key pieces of financial information every small business needs:
Sales & Marketing Integration
Purchase Order Automation
Depending on the type of business you run, it’s possible that not every one of these accounting features will fit your needs. But even if one of these features doesn’t appear useful at first, take time to consider your cash flow and what it would take to organize your financials to grow your business more efficiently. Optimizing your accounting practice means taking a new approach to old processes, and using these key accounting features could enable growth by giving you more flexibility and better insights into your financial and operational data.
2. Adopt double-entry bookkeeping
There are two different types of bookkeeping that are widely used by the small business community: single-entry and double-entry. While single entry does work for some businesses, accounting experts encourage all companies to adopt the double-entry method. This simply means that “every financial transaction has equal and opposite effects in at least two different accounts.” Every transaction is recorded as either a debit or credit, and credits are offset by debits in your general ledger. Because a debit in one account offsets a credit in another, “the sum of all debits must equal the sum of all credits. The double-entry system of bookkeeping standardizes the accounting process and improves the accuracy of prepared financial statements, allowing for improved detection of errors,” according to Investopedia.
3. Refine your invoicing process
Many small business owners think they have a handle on invoicing. But the timing, method you use and your communications around invoicing could all have a significant impact on your bottom line. That’s why it’s important to take the time to automate your invoicing process so you can start getting paid on your terms. “Never add to an invoice after it has been finalized and never create multiple versions of the same invoice. Making changes to an invoice after submitting to a customer will only confuse you, your clients and your accountant,” according to Microsoft.
4. Get a hold of your taxes
To avoid a large tax burden at the end of the year, it’s always a good idea to collect taxes at the time of sale. This will also help you avoid any penalties that can come from delayed tax payments. Overall, be sure you have a handle on your taxes in all areas as they could prove costly if not managed effectively. If you operate an ecommerce site, you’ll also need to account for things like value added tax, country-specific taxes and other regulations. Consult a tax professional who can analyze your unique situation and offer guidance on the best tax strategy for your business.
5. Partner with an accounting firm
Many small business owners don’t have the time to take on all accounting operations themselves, nor do they have the resources to hire a dedicated accountant. If this sounds familiar, consider hiring an accounting partner who can reduce your operational burden and free up time to focus on more important issues. There are many accounting firms out there that offer cost-effective services to meet the budgets of small businesses. Just be sure to do your due diligence and find an accounting firm that not only has experience working with small businesses, but also one that understands your industry so you can get the most benefit from your investment.
6. Work with accounting software that allows for growth
If you want to take more control over your financials, the fastest and easiest way to improve your accounting process is to invest in better accounting software. Solutions like Gravity Software® (Gravity) were designed exclusively for growing, mid-market companies and can enable business growth in a number of ways. By implementing streamlined, easy-to-use accounting software, you can gain real-time financial insights that drive better decisions for your business.
To effectively run a small business, business owners need access to comprehensive financial information and data insights that allow you to make the right decisions and position your business for future success. To do that, you need better accounting processes in place. By following these tips and taking time to truly evaluate your accounting operation, you can establish better accounting processes that pay real dividends for your business.
Better. Smarter. Accounting.