As we all know, starting a business is no easy task. It’s full of countless pitfalls, which is one of the reasons why so many of these companies struggle to survive.
Something that often gets left behind is accounting. After all, in a bid to attract those elusive first customers, many small business owners feel as though this is one of those small, admin tasks that can be left until the last minute. Setting your business for good accounting habits can set you up for success. Of course, working with Profit First professionals can also help you keep your finances in check, but if you’re going to do it yourself then these accounting habits are essential.
As it turns out, this isn’t the case in the slightest. Performed incorrectly, this is something that can cost you money and ultimately, slash your profits.
Bearing this in mind, today’s article will now look at some key small business accounting habits that you simply must tap into if you are serious about staying on top of your young firm.
Constantly update your accounts
First and foremost, the main habit you need to be tapping into is the process of regularly updating your accounts.
Quite often, new businesses will leave this until the year-end. Suffice to say, this is a lot of work in one go, when it can really be broken down bit-by-bit as you progress through the year. It means that no stone is left unturned, and the accounting process will be a lot simpler.
Have a rigid expenses policy
A lot of new businesses try and opt for a relaxed culture with their employees, which is certainly admirable.
However, one area where this shouldn’t occur is with expenses. Firstly, make sure you have an expenses policy and secondly, make sure all of your employees are sticking by it. It means that claims need to be submitted within defined timeframes, meaning that you aren’t going to be left with a big bill months after the initial cost occurred.
In addition, make sure that your own expenses are well-documented. Taken the bus to meet a client? Even if you’ve paid in cash, make sure this has been noted so that everything is recorded for the good of your business.
Always keep one eye on corporation tax
Sure, you might be completely comfortable with the profits that you “think” you are posting – but that’s before you have even considered the tax implications.
For most companies, this comes in the form of corporation tax. There are of course other types, depending on the type of business that you are, but for the purposes of today we will just focus on the 20% figure.
In short, this needs to be built into all of your calculations. Your profits constantly need to be reviewed as the last thing you need is to have to pluck up the money to pay a huge bill at the end of your accounting year.
Keep on top of your fixed assets and depreciation
This might not apply to all of you, but on the whole, most of you will have various fixed assets. Making sure that these are updated, with the relevant depreciation charges, can be paramount to the success of your business.
Particularly in some industries, which tend to rely on large machinery and other expensive assets, this is something that can make or break your business over time.