A large number of accounting businesses just like yours are not equipped with the skills and knowledge to reach real success to track business expense. Small or large, any company can be overwhelming—so workers often forget about the most important detail when it comes to keeping their finances in order. Usually, owners can handle most areas of their companies, ranging from customer service to marketing and accounting, but a tiny percentage of proprietors have a good grasp on finances.
People who run a business are accustomed to taking risks and making sacrifices to follow their dreams and pursue their aspirations; however, being willing to take risks does not mean that you should abandon all caution. Here are some general hacks that will help you maintain your finances and get started the right way:
- Separate your accounts
Keeping separate your business and own assets is essential. This initial step may seem very simple, but it helped you stay incredibly organized and accurate records in the long run. You should not track both your personal and business expense in one account. Open up business checking and savings accounts; once you have done that, you should always try to open a credit card as well to begin building up your business’ credit score. Not only does this help you easily keep track of all your spending, but it is beneficial because it allows you to monitor your expenses in one place. On top of saving money, having these accounts will enable you to manage and project your cash flow efficiently.
- Keep accurate expense records
Now that you have made sure that you have separated your accounts, devise a way to keep track of all of your business expense records by categories and subcategories. When tax season rolls around, owners who do this are in trouble since they cannot remember which expenses they allocated where and which job. For example, some people do not know how to keep track of their auto expenses; if you are taking a vehicle standard deduction on your tax returns, you can also claim 100% of parking and toll expenses. When you spend money, the first thing you need to ask yourself is whether or not it applies to your business.
Maintaining precise records supports the very foundations of your company, in turn monitoring your finances and increasing revenue. Tracking your expenses will also help you prepare for tax planning; painting a correct picture of your finances always helps with growing expenses and may improve tax refunds.
- Use accounting software
Taking advantage of a high-quality accounting tool can carry you far and help set you on the right path. With accounting tools, you can stay on top of your finances and gain more insight into your company’s financial situation.
Implementing the right technology will give you the edge in the industry; you can track your purchases and automate your calculations—eventually, this will speed up the entire data entry process and efficiently provide accurate tax, payroll, and business expense information. By using accounting software, you can save time and money all while being able to concentrate on other business-related activities.
- Ensure your invoices are correct
Keep in mind that invoices are not only documented requests for your customers to make payments. They are also records of transactions among your systems, so they require precision and particular attention. Ensuring that all invoices are accurate, up-to-date, and delivered on time is crucial to the financial success of your business.
There are many different methods you could use to keep your invoices in order, but there are also many different ways you could make a mistake; that is why it is essential to use accounting software, as aforementioned, like QuickBooks. That way, you can keep your records organized and continuously accessible.
- Track your deadlines
Staying aware of your deadlines is essential when it comes to running a successful business. It is easy to forget when something has to be done, so make sure you effectively manage your calendar to keep an organized schedule.
Be sure you are never late when filing your tax returns. This could be caused by back office procedures not being followed through. Keep your tax documents in order since your tax liabilities (such as paying associated bills or filing tax returns) should not be disregarded. Foregoing essential business processes and procedures may lead to penalties for your company. Also, rather than submitting one large payment every year during tax season, prepare in advance so you can make smaller, segmented payments out of your bank account.
- Watch your taxes
Taxes can be intimidating and confusing, especially for startups or smaller companies. However, once tax season rolls around, you cannot use this as an excuse; you should be aware of your obligations based on the type of entity you run. Also, whenever you sell a product, you will need to add the sales tax of VAT based on your customer’s location (Additional fees may apply if you are importing or exporting). In other words, as soon as you make a sale, you need to collect your taxes. Regularly tending to your taxes and remaining aware of what is going on will enable you to stay on top.
- Analyze your margins
You should always calculate and analyze your margins, and that will lead to a consistent increase in profits. This is the case for any business because no matter the industry, examining your margins will help you understand where you stand at all times. It is crucial to determine the net profit margin (NPM), a calculation that will allow you to see what funds remain after subtracting your business expenses.To calculate the NPM, just use the following formula and convert your answer to a percentage:
NPM = (Revenue – Expenses) / Revenue
- Review your financial statements
To correctly understand your financial position in the industry, you need to review your cash flow, Profit and Loss—also known as P&L—and Balance Sheet reports. These statements are probably some of the most important documents that you will need at any stage, such as filing tax returns, receiving funding, or finding investors.
You can view and set them during various periods of your business cycle, so you can always utilize them when you need them. P&L is an excellent tool for obtaining a perspective on your income statement.
Additionally, you should do your best to learn everything you can about your financials. Keep learning because there is always more that you can learn; stay updated on the various aspects of your company so that you do not overlook any issues; remain on top of your company’s KPI reports, so you are aware of all that is going on. If you do these things, you are definitely on the right track to having your business succeed.
Nobody knows everything, as much as we would like to believe otherwise. It is smart to try to understand more about your financials because it will help you improve the way you run your business. This way, you will set yourself on the road the success.