What are the Best Accounting Practices for a Small Business?

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If you want to be successful in any type of business, you need to keep up with your company’s assets, income, cash flow, and liabilities and cangafltd can assist with that. This kind of bookkeeping method, keeping up to date on all financial matters, is crucial, especially for smaller businesses that want to grow. Accounting practices need to be well thought out and executed accordingly. Let’s take a closer look at some of the accounting strategies you can implement while running a small business. 

Accounting Method 

There are two different accounting methods you can utilize for your business. One is cash-based and the other is accrual-based accounting.

Cash-based accounting works best for services and small businesses that don’t hold onto stock or inventory. It’s the simplest form of accounting. The business makes note of profit when there is money received and expenses are recorded when they are paid by cash. 

Accrual-based accounting reports cash when it’s earned and not when it’s received. Expenses are reported when cash is acquired rather than paid. This kind of accounting method is usually better for bigger and more complicated companies that hold inventory or have investors and shareholders. 

If you are still unsure about what method to go with, contact an accounting professional to help explain further. 

Automate/Software

One of the best tips that can be given to a start-up or small business, is to automate bookkeeping and accounting tasks. You don’t have to do everything manually anymore. It will make accounting life much easier if you automate activities like doing reports, sending out invoices, and keeping track of your expenses. Other tasks that can be done online are employee reimbursements for things like mileage, using a database for bills, keeping an eye on customer invoices, and more. 

Choose accounting software that is suitable for your company’s budget and overall needs. There is a large array of accounting software that you can invest in that is also cloud-based. This kind of software organizes, focuses, and aids you in being on top of all your finances. You don’t have to be a tech expert to use the software either. The accounting platform tries to be as simple as possible so it’s easy for everyone to use. 

By automating everything and using software for your bookkeeping including inventory management, you can prevent theft from happening in your business as well. 

Expenses/Payments

The downfall of many a business is spending too much money! This is especially true when you first start a company. Keep a watchful eye on all your expenses and make sure to report everything. This will be very helpful at tax time. Keep a report of expenses so you can take advantage of deductions and write-offs. The best way to do this is to categorize different expenses into categories like payments, administrative, vendors, miscellaneous, etc. 

Set goals for expenses in the future. Split those financial goals into past, present, and future classifications. Any business that doesn’t have a financial forecast in place can lose a lot of money and time. With a future forecast, you can predict many answers about yearly sales, customers, breaking even, and employing enough staff to keep up with demand. 

To keep a business running smoothly, it’s vital to pay your bills on time. You don’t want your company to have bad credit, not be able to keep up with the needs of your company or have a shortage of funds. Do your research before accepting any funding from a bank or financial institution. Some businesses can’t pay the high interest of the money owed, especially when they use the funding received to run operations daily. If you do decide on gathering funding for large purchases or you are seeking expansion, keeping your accounting organized will help secure money from a bank or financial institution.

Other Tips 

One of the first things you should do when opening a small business is to get a business bank account separate from your personal one. If you do this, you can see your company’s cash flow better, and save time by not having to place statements and transactions into a business pile versus a personal one. Tax season will be a breeze because of your documented business items, and you won’t be legally responsible for any business debts incurred. 

Managing a business might come second nature to you, but you might lack the smarts about bookkeeping and accounting. Along with that, you might not be aware of local, federal, and state laws, as well as the rules and regulations for opening a business in the first place. Do you know that accountants tell you to keep seven years of receipts? Always have receipts to claim tax reductions and report all income meticulously to prevent penalties or underpayments. Knowing the legality of things will only help with your company’s success. 

Having a professional accountant on the payroll can be a huge asset to your company. They don’t even have to be full-time employees. They can, however, tend to all the finances and bookkeeping while you can concentrate on bringing in new clients. 

Conclusion

Aside from following good accounting practices at your company, it’s also important to constantly be promoting and growing your company. One way to bring attention to your business is by using Custom Flags, which can be printed with your company name, colors, logo, and promotional messages. If you are looking to purchase Custom Printed Flags including Custom Feather Flags, consider Flagdom at: https://flagdom.com/custom-flags.

The advice given in this article is a guideline only for the best accounting practices for a small business. If you require help with a particular issue, seek professional help. Regardless of what you incorporate into your daily running of operations, stay organized, and on top of financial matters. Doing so can only bring fruition and prosperity to your business. 

Cody Rhodes
Cody Rhodes
Cody Rhodes a learning specialist, designs and delivers learning initiatives (both in-class and online) for a global and internal audience. He is responsible for the ongoing development, delivery, and maintenance of training. He has the ability to manage competing priorities to execute time-sensitive deliverables within a changing environment. He contributes to continually improving the team's processes and standards and works as a member of the team to assist with team initiatives.

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