Along with the exciting parts of running a small business come a few headaches. One that might be particularly painful is your business accounting. Keeping the books for a business is like balancing your checkbook with ten times the frustration and about a hundred times the need for accuracy.
Unless you're an accounting whiz, or one of those odd people who actually find accounting fun, you may be looking for a few ways to make your business accounting responsibilities easier so you can focus on the other aspects of the business. Here are four small business accounting tips to help you on your way to financial success.
Hire a Pro if You Need One
There's a big difference between not enjoying accounting, and just not being good at it. If the latter is true for you, admit it, and get professional help. No, not that kind of help, although that may come in handy on those particularly hectic days in the life of a small business owner. For now, hire an accountant. Yes, it will cost you. But just think how much a horrible accounting error might cost you, and your business. If, on the other hand, you're not too bad with accounting, but the thought of doing your business taxes is enough to send you into nervous fits, consider at least hiring a tax consultant.
Before you trust someone with your books or taxes, though, check in with other business owners for recommendations. Accounting site communities and business networking sites are a great places to find tips for hiring a tax consultant or accountant, and should be your first stop before you start seeking quotes.
Buy Accounting Software
If you decide to do the accounting yourself, you'll need to get organized. Keeping a bunch of receipts in a shoebox, and writing expenses in a notebook just won't cut it. If you're still doing your accounting this way, you may want to reconsider the whole business thing altogether. Using a spreadsheet program to keep track of your business finances is a step above that, but it's still not your best option. You need to take out the corporate checkbook and buy some accounting software.
Before you make that purchase, do a little research. If you're a small business with just a few employees, you don't need something as robust as a business with, say, 100 employees and millions of dollars in revenue. Again, ask around to see what other people are using, and then choose what works for you. You may want to check out Chrome River invoice processingor other multi-faceted solutions. Just remember to select something that's scalable and can grow with you so you can avoid shelling out more money later on for something completely different when you take on more employees and your revenue increases.
Want to save a bunch of money right now, and increase the probability that your invoices will be paid on time? Go paperless. If you're still printing and mailing invoices to your clients, take a moment to add up how much you're spending on paper, envelopes, and postage. And then how much you're spending to send payment reminders and late notices. And then how many trees have had to die so you could run your business. Going paperless is better for everyone.
This is actually one feature you'll want to look for when choosing accounting software— invoice printing capability. It doesn't make sense to have those two things separate. Sending electronic invoices allows for better tracking, and faster response on both parts. And when your client claims his payment is late because he didn't get the bill, you can have another one to him in seconds rather than days. You may even be able to attach a read receipt to avoid that excuse in the first place.
Keep Impeccable Records
We've already discussed the receipts in the shoebox. Even if your recordkeeping isn't that bad, are you sure it's good enough? What would happen if you were tagged for an IRS audit right now? Could you survive it? Keeping good records isn't enough when running a small business. Your records must be impeccable.
Good accounting software will come in handy here, too. Just remember to regularly back up your financial information. Whatever paper records you must maintain (maybe your bank doesn't offer electronic statements), keep them in order and accessible. You may even want to consider scanning them to keep electronic versions. Be sure to log every expense, and every bit of income. That way, if and when you do end up on the tax man's radar, the process will be much less painful.
With a little preliminary investigation, careful planning, and attention to detail, small business accounting doesn't have to be such a chore. By putting a few good ideas in place, you can focus on running your business, and not worry so much about the books.
Anita Campbell is the Founder of the Small Business Trends website and CEO of BizSugar, an online community of small business owners.