Whether you’re managing your own small business accounting or hiring a professional to help you out, here are some expert tips and best practices to ensure accurate and complete financial records.
Though it may seem obvious, it must be reiterated, especially for new business owners. Having separate bank accounts for your business and personal finances will make it easier to generate financial reports at the end of the period.
Plus, if you’ve formed an LLC for your business, it’s an important distinction that helps distinguish between yourself and your business as its own separate legal entity. Thus, make sure to open up a new bank account for your business if you haven’t already done so to help protect your personal assets.
Make sure you hold onto all receipts for business expenses. This allows your accountant to get a comprehensive picture of all cash outflows for accurate financial reporting. Plus, it provides a clear paper trail to support any tax write-offs or deductions your spending entitles. But, without the accompanying receipts, it can be difficult, or even impossible, to accomplish.
You never know when an unexpected event could put your business in a pinch financially. Maybe you receive a set of chargebacks, the HVAC unit in your office needs repaired, or an incoming payment from a client is delayed.
Regardless of the reason, you still need to meet your own obligations like processing payroll and paying suppliers. This is why it’s important to maintain an emergency fund or cash reserve for a “rainy day”, just as you would for your personal finances. This will help protect your business from financial stress during a downturn.
Meeting tax deadlines throughout the year can help your business meet its obligations and avoid costly late fees, penalties, and even legal consequences.
As a small business, you likely have more filing deadlines to remember than the April 15th deadline for individual tax returns. For instance, if you have employees, you need to file the appropriate W-2 or 1099 forms by January 31 each year and make estimated tax payments each quarter, among others.
To help you stay on track, set up a tax calendar at the beginning of each year. This will give you ample warning as deadlines approach, helping you stay organized throughout the year.
Reconciling accounts ensures that your internal records match external statements provided by your bank, credit card company, vendors, and other third parties. This helps you verify the accuracy of your financial reporting and spot potential discrepancies or attempted fraud that could impact your financial health.
While it’s easier said than done, you need to complete account reconciliations regularly — like each month — to identify and correct issues before they’re too late to reverse. While this can be a time-consuming task, if you let statements pile up without reconciliation, errors may go undetected, leading to costly mistakes.
Set a regular schedule for yourself or delegate a team member to the task to ensure reconciliations are regularly completed.
Establish a filing or organizing system for your business financial records and educate or train relevant staff members on it. This includes keeping all receipts, invoices, purchase orders, and other financial documents well-organized and easily accessible.
Whether you do so with physical documents and filing cabinets or an electronic system is up to you, though digital platforms may have automated capabilities to support better efficiency.
Your future self will thank you when you need to track down a specific invoice from a supplier or historical financial statements. Plus, this can be highly useful during tax season or audits, helping to minimize the amount of time you spend looking for documents, and more time completing the actual work.
While it’s important to focus on right-sizing cash outflows, you should also have a structured system in place to manage cash inflows. This means promptly sending invoices to clients and customers and reminding them of overdue invoices to maintain steady cash flows.
It’s all too easy to get behind on invoicing when you’re busy with other tasks and keeping operations running smoothly. However, you must be diligent about your invoicing processes to ensure you’re able to collect all the money you’re owed.
For many growing small businesses, managing accounts isn’t their core competency. However, building out an accounting department is not optional.
While accounting is an essential foundation for accurate reporting and strategic financial planning, teams may struggle to find the right talent to hire internally. Either they don’t have the resources to pay a seasoned expert at the industry rate with full-time benefits, or the accounting talent shortage makes it difficult to recruit and hire local professionals.
For this reason, outsourcing the accounting function is a viable option. It ensures businesses of all sizes can access skilled talent and accounting expertise at a scope that’s appropriate for their business. It’s often a more cost-effective alternative, plus it allows you to seamlessly integrate skilled professionals into your existing workflows.
No matter the size or growth stage of your business, chances are you need some extra support in the accounting department. Whether you’re looking for full-service outsourced bookkeeping, tax accounting, or strategic fractional CFO services, the expert team at Bob’s Bookkeepers can help.
Our team is comprised of seasoned industry professionals who have years of experience helping businesses like yours thrive.
Contact us at Bob’s Bookkeepers for more information about our custom outsourced accounting services.
