Vlad Rusz is a CPA at Centaur Digital Corp, helping busy business owners efficiently manage their accounting systems.
Any accountant will probably state that you can’t run a business without good accounting. But some business owners run their businesses just fine without a formal bookkeeping or accounting system. Is it advisable to just wing it? Probably not, but plenty of people still do. The good news is that accounting doesn’t have to be hard, and you don’t need a super sophisticated accounting system to manage your business. Follow these five accounting tips to help you manage your business better, even without a formal accounting system in place.
1. Focus On Yearly Subscription Costs
It’s easy to sign up for yet another subscription that costs only a few dollars a month, but too many of them can quickly add up. A better way to understand the cost of your monthly subscriptions is to calculate the yearly cost. A $30 monthly subscription is suddenly a $360 expense, which puts it in a better financial context.
You may also want to consider paying your subscriptions yearly rather than monthly if you can. This way, you’ll reduce the number of transactions you need to track each month, making it easier to manage your cash.
2. Track All Expenses
Use an effective, efficient system to track all of your expenses. There are many ways to do this. Simple examples include entering every expense in a spreadsheet or scanning all receipts and saving them in a cloud folder.
Whatever system you choose, make sure you’re tracking all expenses. It’s important for knowing how much money your business is making and ensuring that you are paying the least possible amount in taxes.
3. Create Separate Accounts For Different Expenses
While you should always have a designated business bank account to separate business funds and expenses from personal ones, you also may want to consider opening separate accounts for different business expenses. For example, you can set aside a certain percentage of your sales in one account to cover hefty one-time expenses, such as payroll or a large business purchase. Having separate bank accounts will give you a visual representation of what each dollar in your accounts is for.
4. Focus On Cash
Large enterprises typically rely on profit and loss statements or sales to determine how well they are doing because they have easier access to capital and loans. Small businesses usually do not have this option, or even a profit and loss statement, so it’s important to understand your cash situation.
Without cash, a business will inevitably fail. While it’s great if your profits are increasing, if your customers aren’t paying their invoices, you won’t be able to pay your bills.
5. Consider Outsourcing Your Bookkeeping
Most business owners are not accountants, but in the beginning, you inevitably have to be. Eventually, your business may grow big enough that you can hire extra help. Outsourcing some of your bookkeeping and accounting tasks will free up your time while granting you access to someone with more knowledge about the subject. This will also be the time to set up bookkeeping software and create reliable systems to ensure you’re tracking every dollar.
The accounting system you use should be appropriate for your business’s stage. I don’t recommend splurging on a fancy accounting system when you first get started because it’s unlikely to provide enough benefits to justify the cost.
Remember to track all expenses, reduce the number of transactions by paying subscriptions yearly, use separate bank accounts for larger expenses, focus on cash in and cash out, and outsource your bookkeeping when the time is right.
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