Whether you are a small business owner or a tradie in the construction industry, it is important that you understand the accounting basics. Small business owners who have an understanding of accounting can stay organised and focus most of their energy on running their business.
Business owners can get away with managing their own books if they follow the tips in this article, but sometimes the help of an external accountant is needed as the business grows.
Here we are going to provide you with some tips that will make accounting quick and simple and will keep your company on the right financial track.
Get a Separate Business Bank Account
Having a separate bank account for all your business expenses will save you a lot of time and make it easier for you to track expenses and revenue.
Business bank accounts can help business owners to meet tax obligations, and it is also a requirement for a limited liability company to have a separate business account.
With a separate account, you will be able to deduct business expenses on a tax return. If your personal and business accounts are not kept separate, you can be penalised for deducting personal expenses.
Track Your Expenses
Expense management is crucial. You should divide your expenses into categories, and label each expense accordingly. Through expense tracking and monitoring your cash flow, you can capitalise on tax write-offs.
Try to avoid spending cash as this will leave you sorting through cash receipts when you are calculating your expenses. If possible, rather use your business credit card for all payments. If you cannot avoid spending cash, make a digital copy of all receipts.
Record Your Income
Whether your income comes from loans, sales, invoices paid to you or other cash boosts, it is important that you keep track of all money coming into your business.
Consider Getting An Accountant
You do not have to permanently appoint an accountant, but it could be beneficial to have a professional help you out for a few hours a month. Business owners and those looking for accounting for tradies help can all benefit from an external accountant’s assistance.
A certified public accountant can help you file taxes, plan your expenses, analyse financial statements and help with tax deductions.
Utilise Small Business Accounting Software
Small businesses will benefit from cloud-based accounting software. A business owner can use it on their own, or it can be accessed by a bookkeeper or professional accountant.
There are lots of popular accounting software that can be accessed for a small monthly fee. This software helps to keep track of business income, can access your bank statements, help you keep track of invoicing, assist with payroll, and generate financial reports.
Keep The Books Up To Date
If you don’t have a bookkeeper, take time out of your week to get your books up to date. File all business transactions and update your accounting software if necessary.
Track your accounts payable and accounts receivable and make sure these accounts are up to date.
Track Labour Costs
If you have employees, you should track their time, benefits and labour costs. Payroll software can help you with this. You will be able to see if you are under or over-paying your employees, and also help with payroll taxes.
Expect The Unexpected
There are almost always surprise expenses when running a business, and being prepared for these expenses can save you some headaches in the future. Upgrading technology, repairing equipment, or unexpected capital expenses should be budgeted for and planned ahead.
Follow Up On Cash Owed To You
Most people do not pay invoices immediately, and it is up to responsible business owners to follow up on invoices sent out to make sure payments are received.
Invoices should be sent out as soon as work has been completed (invoicing software can help with this), and reminders should be sent as the payment date looms.
By doing financial forecasting for upcoming years, you will get an idea of the financial health of your company.
You can calculate general profits (or losses), determine how well off the business will be in the next few years, and can tell you whether you will require a loan or invest your revenue.
Forecasting is difficult as external factors can influence your cash flow, so make use of an accountant or accounting software.
The tips listed above can make your business’s accounting easier, especially when it comes to small businesses. Getting in touch with an accountant and making use of available accounting software will help startups and existing businesses flourish.