Starting a business is a difficult undertaking that is not for the faint of heart. There’s always some aspect of a business that requires an entrepreneur’s attention, including marketing, inventory control, product development, and others, but one area that seems to always get short shrift is accounting.
For any entrepreneur who is not a numbers person, the thought of shuffling through endless financial documents can be frightening. This is despite the fact that nearly anyone knows accounting information can provide the clearest picture of the health of a business. Fortunately, there are firms such as Brown Smith Wallace to help.
In the meantime, getting a handle on these seven accounting tips for business will get an entrepreneur started
Know the Law
Knowing what the law requires in terms of your accounting data is critical to staying out of trouble. It’s important that an entrepreneur always be aware of how the law applies to their business. An entrepreneur should know when taxes need to be filed, what information is required on revenue and expenses, how long should records be kept, and more.
Keeping Business and Personal Finances Separate
it might be true that a sole proprietor is taxed as an individual, but in terms of accounting, all business matters must be kept separate from personal matters. There is no way to manage cash flow accurately if business and personal records are intermingled. An entrepreneur should always maintain separate business and personal bank accounts.
Always Watch Expenses
It should go without saying that expenses must be closely monitored in order for a business to stay solvent. Even small expenses can get out of hand if there is no one monitoring them. Also, be careful with credit, since credit card debt can put a stranglehold on any business. And any entrepreneur who wants to use a credit card should get one that pays rewards and points.
Use a Good Accounting Software Package
Managing finances is a task that not too many entrepreneurs are comfortable with. Fortunately, there are many accounting software programs available that make bookkeeping a snap. And, any entrepreneur who might find himself on the road or who wants to share records with someone else might find it handy to get a cloud-based accounting package for easier access.
Hire a Professional
As complicated as the tax laws are, most entrepreneurs find themselves over their heads when it comes to financial matters. It’s for this reason that many entrepreneurs often find themselves in front of a professional for help. Any entrepreneur who is not sure of themselves when it comes to financial matters should turn to an accountant sooner rather than later to prevent problems. This approach will probably save them money too.
Manage Salaries and Wages
More than 70 percent of the expenses of a business come in the form of salaries and wages. This figure increases when overtime is paid to employees when they work during busy times and holidays. It is critical that an entrepreneur keeps close tabs on how much labor is costing and whether the results justify the increased expense.
Better Safe than Sorry
“Business doesn’t cost, it pays” might seem like an old cliche, but the truth is that entrepreneurs often find themselves short of needed cash. These lean times can be prevented by saving during better times.
According to a report issued by the Small Business Administration, a prime cause of business failure is due to insufficient capital. An entrepreneur can prevent this from happening by keeping accurate track of business by using better financial management practices made possible by good accounting practices.