As the leader of a small business, you likely have plenty of responsibilities. Whether you’re developing new ideas and strategies, working with clients, or simply managing everyday operations, it can be hard to find enough time to focus on your finances. However, staying compliant and being in control of your funds is critical for the success of your business in the long run. To that end, here are some of the most essential accounting tips you should keep in mind when running a small business:
Separate your finances
For most small business owners, personal finances and business-based funds have a tendency to mix. But even though that might be common, blended finances can only cause more issues, from smaller practical ones to larger legal problems. To avoid this and keep the entire process stress-free, it’s recommended to open a separate account for your business and keep it divided from your personal finances. You will be more organized and coordinated this way, and it will be easier to track both your personal and business funds in an effort to make wiser financial decisions. You can explore the services of Florida Capital Bank if you are looking for the best bank for small business in Florida.
Streamline your records
Work styles differ and some entrepreneurs prefer a bit of chaos to support their creative processes. But although that may work in your personal life, it should never be applied to your books and your bookkeeping habits. Instead, it’s best to keep all the necessary documents tidy, categorized, and neatly organized. Not only will this help to save some time and stress searching for important documentation, but it can also be of great help when approaching tax seasons, dealing with legal issues, or working with accounting professionals in any capacity.
Use an application
Considering the fact that we are so dependent on technology nowadays, it truly comes as no surprise that there’s an application for virtually everything, including finances. For example, you can download a budgeting app such as Mint or YNAB on your phone to streamline your personal finances and keep them separate from your business funds. Or, you could invest in specialized bookkeeping software to keep your outgoings, incomings, taxes, and other business-related financial records organized. Regardless of the solution, technology can make financial management much easier and more efficient in any case.
Know the tax rules
Taxes are a vital consideration for all businesses, one that can come with serious legal and financial consequences if not managed properly. However, this can also be a complex area to comprehend, especially when it comes to determining which regulations apply to you and your small business, and which taxes you actually have to pay. That is why working with industry professionals such as Verus accountants can prove to be quite advantageous. These experts will provide you with in-depth knowledge and great advice for creating tax-effective strategies, protecting your assets, and building your overall wealth.
Adhere to tax deadlines
In terms of taxes, remembering deadlines is another crucial aspect you should focus on. Ask your accountant to send you an email, set a reminder on your phone, mark the date in your calendar, or do anything else that will remind you that the tax deadline is approaching. This period can often be stressful, especially if you’re forced to rush due to any mistakes or a lack of organization. Setting reminders and following deadlines will be necessary, helping to ensure your records are accurate and that local authorities won’t pester you because you weren’t prepared on time.
Budget for taxes
Another tip that might help in dealing with taxes is advanced planning. No matter how large your profits may be, remember that they’re not all yours until you pay your taxes. For this reason, budgeting for this period throughout the year may be a good tactic for avoiding shock during tax season and ensuring you have enough funds to cover what you owe. You can do this by setting up a specific savings account for taxes and putting some money in it each month in an effort to pay off your taxes easily and happily enjoy the rest of your profits.
Make a P&L statement
A profit and loss statement (P&L) provides you with an overview of the financial health of your company. It aims to summarize the costs, expenses, and revenues during a specific time period, and it might even be required by your local government to satisfy their rules. A P&L statement should include data such as your operating profit, net profit, gross profit, and profit before tax. If created correctly, this statement will make it much simpler to track and analyze the expenses and profits of your business, and identify potential areas of improvement.
Whether you’re hiring a professional or handling your finances yourself, the right strategy will be critical to success. Follow the advice above to gain a better understanding of accounting and find new opportunities for your small business to grow.
