It’s vital for you to be accounting literate to ensure that you are running your business right. You don’t have to be highly skilled in accounting to run successful business. However, having basic knowledge of it will be beneficial for you to ensure day-to-day business operation run smoothly. In addition, not many business owners are accountants by trade so it’s fine for you to learn only the basic.
Learning accounting and how to implement it in your small business
Small business accounting is not as daunting as it seems. In fact, it is relatively simple and if your small business operate in single state or have simple business structure, knowing some accounting tips will be useful for you to stay on the right path.
Avoid blunders of personal and business accounts
Mixing your business and personal funds is never a good idea. It’s true that some entrepreneurs chip in their own startup money. However, business expenses and revenue must be separated from personal ones. Open a business checking account as you financial hub. Pay yourself a salary from it each month so you personal account can be sued for personal expenses. You can also open and use business credit cards you can use for cashless payments.
Make calculation before hiring
Deciding to hire employees, you need to know the estimation of the expenses you have to prepare. Also, be aware that you are not going to be on the hook for more than just wages since you have to think of their benefits and payroll taxes.
Create regular profit and loss statements
To summarize business income and expenses you need a profit and loss statement since its the staple accounting. And you have to make them over a given period. It’s not required by laws but profit and loss statement can be provide information to see whether you are on track to meet your financial goals.
Get and keep the receipts
It’s important to keep the receipts of the expenses of your small business. It’s vital for effective accounting so that you can keep track on your expenses. The receipts are proof you are going to need to ensure that you know the in and out of your business expenses.
Invoice regularly, accurately, and efficiently
One of the parts of owning a business is invoicing. Even though it’s not something many business owners love to do, it has great impact to your business. It may be a time-consuming task but if you make a mistake, your business can be affected especially in the matter of your ability to get paid. Send out invoices regularly, accurately and efficiently and keep the detailed, accurate records.
Stick to your payment terms
Try to be more consistent with your payment terms. Avoid paying late because it can be damaging to not only your financial plan but also to your reputation. Vendors may not want to work with you anymore if you keep paying late. It’s the same with your tax deadline so stay on top of it.