Although there are 28 million small businesses in the United States, 82% of new small businesses fail due to financial problems. If you don’t want to join that group of failed businesses, it’s important to keep up with your business accounting.
Keeping up with your finances will minimize surprises and help you plan for the future of your business. This means you need to know how to do accounting for small business needs.
How to Do Accounting for a Small Business
Small business accounting requires time and organization. While this aspect may not seem as important as other needs, organizing your finances makes everything else easier. While this encompasses many aspects, there are six tips you can put in place immediately to get everything in order.
1. Separate Business and Personal Finances
The most important thing you can do is separating your business and personal accounts. Get separate bank accounts and lines of credit for your business, and keep separate records.
If you use personal finances to capitalize your business, keep records of these transactions in your business accounts. Keep everything above-board and separate for tax purposes.
2. Keep Track of Inventory
Inventory is a major asset. Loss of inventory is loss of money to your business. This makes keeping up with inventory important to your business finances.
Plan for regular inventory checks. Put a system in place to help you keep up with what you should have. Keep proper records of any inventory loss and have balances in place to keep everything in order.
3. Track All Revenue and Expenses
For every transaction, you need detailed notes. Categorize transactions so you have everything in order for taxes.
Each transaction should get recorded as soon as possible using an expense report software. Also, keep up with all invoices and purchase orders. Make sure you know when payments are due and when they get paid. This will help you make sure nothing slips through the cracks.
4. Plan for Major Expenses
Things break down and new equipment is needed. Filing deadlines mean large sums spent.
You need to get yourself prepared for these big expenses. Have savings on hand to handle major expenses during slow seasons. Keep up with deadlines for large sums of money so you’re not surprised.
5. Prepare Financial Forecasts
Keeping your finances in order goes beyond the current fiscal year. You need an idea of your future financial situation so you know how to plan for future needs.
You can’t plan for everything, but you can get an idea of upcoming changes. Look at forecasted market issues and inflation so you can determine where to invest your business revenue.
6. Invest in Bookkeeping Services
As your business grows, you’ll need help keeping up with your finances. You can hire people or firms to handle your bookkeeping and accounting needs as it gets too involved for you.
You can hire people to keep up with books or help you with financial planning. You can hire people for payroll services. If you’re not ready for this expense you can at least purchase accounting software to help you automate the process.
Stay Informed About Your Business Finances
If you’re wondering about how to do accounting for small business needs, the above tips are just a start. You need to have a comprehensive plan in place. For more help with creating your financial plan, check out more business finance tips on our site.