Whether you run a small business or a large corporation, the bottom line is simple: make money. To do that, you need to implement a realistic accounting plan with a budget, accurately record financial transactions and always keep good records.
When resources are in short supply, as they often are for the small business owner, there are a number of efficient and cost-effective ways to stay on top of accounting.
QuickBooks is a powerful accounting software for small businesses, and there are many courses available online. You should also find a good Certified Public Accountant (CPA) and meet with them quarterly.
If you lack the resources for a CPA, have an administrative person dedicate time to entering information into the system. Record keeping — saving receipts and entering expenses weekly — is key to any business, small or large.
Avoid the accounting “don’ts” that can put your business at risk. There are a number of common accounting mistakes, especially for new or young businesses. These include the following:
Not tracking expense receipts
Failing to meticulously keep expense receipts can result in tax, accounting and cash-flow problems. Have you ever looked at your bank statement and wondered about a charge? Having the actual receipt easily accessible can avoid many headaches later if you’re ever audited. Keep all business-related receipts in a certain place and file in your tax folder or save digital copies.
Failing to record cash expenses
As reliant as we’ve all become on mobile devices, credit cards and the Internet, it is easy to overlook expenses paid for with cash. Oftentimes, these expenses are not recorded and just as quickly forgotten, causing the business owner to inflate reported income. Treat these expenses the same as you would other ones related to the business and record all receipts.
Not keeping up with receivables
When a business issues an invoice, a receivable (denoting that a customer owes you money) is recorded. The account will be marked as outstanding until the customer pays all or some of the bill, and then payment should be applied against the invoice.
Sounds easy, right? In reality, and with limited time in the day, customer deposits are often left to reconcile later. Not keeping up with receivables can prove to be a bear when tax time comes, so the wise business owner will dedicate a day each month to apply payments.
Handling taxes themselves
Out of necessity, small business owners have to wear many hats. Investing resources in a proper tax professional means you will have an expert who knows what they are doing, is current on the constantly changing tax laws and who can claim all of the deductions you qualify for.
Not hiring an accountant who understands your business
Will Rogers said, “Everyone is ignorant, only on different subjects.” While you’re good at running your business, your accountant should be good at crunching the numbers and keeping your company fiscally healthy. However, a good accountant should also understand your business, as well as how to communicate most effectively with you.
Although small businesses are always strapped for resources, it is critical to include accounting in your planning. With the correct procedures and people in place, your small business will be poised for success.
Cherelle Cortez is the diversity manager at the Rives E. Worrell Co., a JE Dunn Construction Company. She can be reached at Cherelle.Cortez@jedunn.com or 912-354-1386.