Small business owners, we recognize you have a lot to do. Starting a new business or growing a small one means that there's a lot of action occurring all at once. When too much happens too quickly, there simply may not be time to stay organized. A back office necessity, that is crucial to your business, is organized accounting and bookkeeping.
At a minimum, here's what you can do to organize your small business accounting.
Why Organize Small Business Accounting?
PMNTS.com recently reported that the number one frustration among small business accountants is lack of proper record keeping. In fact, research also revealed that more small business owners are leaning on business analysts to grow their business instead of including accountants. Why is proper bookkeeping and accounting important to your business? Your business depends on it for paying taxes, avoiding IRS audits, and making decisions about the future of your business.
Have questions? We have knowledgeable CPAs on staff who can help. Contact us.
As monumental as it may seem, getting organized has to start somewhere. One of the best ways to begin is to invest in accounting software. Quickbooks and other software packages also have a way to involve an accountant, with access to your books, so you'll have a professional on hand to assist. You'll need to start by collecting the information about your business. You may also realize a few things up front:
Keep business and personal separate. Maybe you meant to do it eventually but you'll need to separate your business and personal expenses. It may be easiest to create separate checking or credit card accounts so you'll know which account to use when purchasing office supplies or paying bills. You may even consider starting a business savings account to store away funds for tax time.
Track Income and Expenses. Have you been keeping an envelope of receipts? Now is the time to gather all of your receipts and vendor bills as they pertain to your business. When your clients are paying you, keep track of the payment method, when they're paying, and which invoices are being paid. This information is valuable to ensuring that no invoices are still unpaid and that all expenses are accounted for. If your business is out of your home, you'll need to obtain those bills as well, especially for tax purposes, as you can write off a part of your payments.
Invest in accounting software. After installing the software, take the time to enter the information that you have on paper. Enter your invoices and payments. Enter all expenses. If you have payroll or subcontractors, make sure your software program includes a sections for tracking labor costs. It will take some time to input this information but the process going forward will be more organized.
Schedule time for record keeping and reconciling. Once you've entered expenses and income into your accounting software, you'll want to schedule time for regular record keeping. This time will be dedicated to entering invoices, payments, bills, or other transactions as they occur. Also, make sure to reconcile your accounts with your bank statements.
Review cash flow. With all of your information consolidated, you can now generate cash flow reports so you can be aware if you're running short, or if you'll have extra funds to reinvest in the business.
Follow up on past due invoices. All of those times you didn't realize your client hadn't paid? With your organized books, you'll be able to run an accounts receivable report to determine which invoices are late or past due. Don't be shy about sending a friendly reminder email or calling to find out why they haven't paid yet.
Hire help. (Optional) Now that you're organized, you will know if you can afford someone to help with bookkeeping, accounting, or accounts receivable clean up on past due invoices.
Hiring a Collections Agency. You may realize that some invoices have been swept under the rug by your clients. It may be time to hire some help that you won't have to pay for unless it works. Yes, that's right. Through Enterprise Recovery, corporate collection fees are completely contingent on the success of recovery efforts. That means if we can't collect, you don't pay.
Take a deep breath and reward yourself for getting organized. This process may take a day out of your life but your mind will be clearer. Your business will run smoother. Your checkbook will be happier.