If you’re a small business owner, then it’s important that you take the time to understand the latest small business accounting best practices. There are many new changes in this area that will help your company save money and make more of them.
In this article, we’ll go over what some of these strategies are so you can make an informed decision about how to proceed with your small business accounting strategy.
Separate Your Business and Personal Expenses
One of the most important small business accounting best practices is to separate your personal expenses from your business ones. If you’re not doing this already, it can be a great way for entrepreneurs to save money on taxes at the end of the year. There are also some other benefits as well:
For example, if something happens with one portion of your small business (such as damage or theft), then only that portion will suffer from those losses rather than both portions being affected equally.
This makes sense because all small businesses should have an emergency fund in place for such incidents anyway.
Therefore, why not take advantage of tax savings too? It’s certainly worth looking into further.
Track Every Business Expense
It’s easy to get caught up in small business life and think that certain expenses are small enough to not matter.
However, the truth is that it all adds up quickly, especially if you’re spending money on things like supplies or office equipment. Then again, every little bit helps.
That’s why it makes sense for small businesses to track their expenses as closely as possible so they can save several thousands of dollars at tax time each year by deducting them from their taxable income.
For example, suppose your small business spent $20K last month on various supplies throughout the course of doing business this past month?
If you have a licensed CPA who knows how to go through these numbers with a fine-toothed comb then chances are that they’ll find small business expenses you weren’t aware of before.
When in doubt, it never hurts to ask your accountant if an expense is deductible or not when tax season rolls around. That way you can be sure about all the deductions and credits available to small businesses like yours this year!
Keep Accurate Business Records and Data Files
Next, small businesses should make it a point to keep accurate records and data files throughout each day so they don’t miss any key opportunities for saving money at tax time over the course of the upcoming months.
For example, let’s say that one month your small business happens to bring in $15,000 more than usual somehow (we’re talking out-of-the-ordinary here).
That $15,000 would be great but what if you didn’t have the records necessary to track down everything? You could lose out on small business deductions or even miss opportunities for tax credits entirely.
Therefore, it’s important that small businesses take advantage of available online software programs like QuickBooks so they can keep their small business accounting strategy in order throughout each given month.
Consider Hiring a Licensed CPA
Small businesses may want to consider hiring a licensed CPA (certified public accountant) who can help keep their small business accounting strategy in order.
For example, if you’re already spending at least $20,000 per year on various small business expenses then it probably makes sense for small businesses like yours to hire someone who knows what they’re doing when it comes to things like this so everything is done correctly and legally.
After all, the last thing anyone wants is for your company’s hard-earned money or savings opportunities to go unclaimed because of simple mistakes that could be easily avoided.
Unfortunately, many small businesses don’t realize just how valuable professional tax preparation services are until after the fact. That’s why now is the best time to take advantage of small business tax savings from a licensed CPA.
Automate Your Small Business Accounting Operations
Next, small businesses should consider automating small business accounting operations like invoicing and payroll to make the entire process run more smoothly (and efficiently).
For example, it’s no secret that small businesses stand or fall on how well they can keep their small business finance strategy in order when selecting accountant practice management software.
That being said, trying to manually track down every penny spent is not only time-consuming but costly when you factor in all of your actual labor costs – especially if you’re doing this alone.
Instead of wasting so much money each year by hiring out for help with various small business tasks why not invest a little bit upfront into automated software programs?
That way everything runs smoother & faster while saving valuable company expenses at tax time too.
Set Aside the Time to Update Your Books
Small businesses should make it a point to set aside the time each and every month (or quarter) to update small business books properly.
For small businesses who already keep their small business accounting strategy online, this is as simple as logging into your account and making the appropriate changes for that given time period.
However, those who prefer to use paper records will need to take a few extra steps like updating all of those little papers with new information on them.
The good news is that small businesses can easily set up reminders online so they don’t forget about doing things like this in advance (saving you money at tax time).
Overall, keeping accurate small business books throughout each month makes it easier than ever for small businesses to get organized and stay ahead of the game when it comes to saving money over the course of the year too.
Monitor Your Company’s Labor Costs
Small business owners should make sure they are always monitoring their small business labor costs.
For example, if you’re planning to hire an outside bookkeeper or accountant then it’s important that small businesses track all of the hours spent on your company instead of simply paying them for each hour worked (this could save even more money).
However, those who plan to work with family members need to pay special attention here because this rule does not apply in many cases, which is why it’s so critical that small businesses keep accurate records and monitor all spending throughout the year.
Overall, small business accounting best practices can help companies stay organized and efficient while saving lots of time and money over the course of a given year too.
Minimize Your Overhead Costs
Small businesses should always strive to minimize their overhead costs.
For instance, small business owners who opt for expensive office space with tons of amenities might feel like they need a full-time receptionist on duty at all times or an executive assistant to help out.
However, that’s often not the case.
In fact, many small businesses can save money by working from home and hiring virtual assistants as needed instead (or even outsourcing tasks altogether).
That being said, small businesses who plan ahead throughout each year will find it easier than ever before to stay organized while minimizing small business expenses too.
Stay Prepared for Major Expenses
Small businesses should always be prepared for small business expenses throughout the year.
For example, small businesses that pay their bills on time instead of waiting until they are due will save money in so many ways (not to mention avoid paying late fees).
However, small business owners can easily set up automatic payments online with most companies (or even ask them if it’s possible to do this) which means that everything is paid on time without any hassle whatsoever.
You could also automate your savings too by having part of each paycheck automatically put into a separate account before you even see it.
This way small businesses won’t touch these funds and can use them only when necessary (which saves more money).
That being said, saving small amounts here or there can add up over time which is why small businesses who put in the effort to stay prepared throughout each year will find it easier than ever before to save money too.
Set Realistic Financial Goals
Small businesses should always set realistic small business financial goals.
For example, small business owners who are setting up their first accounting system may feel the need to do things like separate all transactions into different accounts right away (when it’s not actually necessary).
However, small businesses can easily set up a general ledger that includes one account for income and expenses without any other separation unless otherwise needed according to professional standards instead.
This way small businesses won’t have to deal with extra work that could come back to bite them down the road because they don’t meet specific guidelines or industry rules.
As you can see, understanding how small business best practices works is easier than ever before so make sure your company gets ahead of the game this year.
Keep Strict Inventory Records
Maintaining strict inventory records is key.
For example, small businesses that choose not to count every single item in their stock will find it difficult to sell everything on hand at the right price down the road instead (which can affect sales).
However, all small businesses need to do is set up an accurate system of counting items throughout each day or week which means there’s no risk whatsoever of losing track of anything important.
Overall, small businesses that put in the effort here will be able to get more for less when they are ready to make a sale.
Always Follow Up on Invoices to Avoid Tax Burdens
Entrepreneurs this year should always make sure small business invoices are on hand.
For instance, small businesses that send out an invoice but never hear anything back might find themselves being hit with a tax bill for something they didn’t even know about at the end of the year instead (which is why it’s so important to follow up).
However, small businesses can easily set up automatic reminders in their accounting software which means there’s no risk whatsoever of forgetting when the rent has come due or any other type of payment either.
Create Financial Projects for Future Years
It’s important to create small business projections for future years.
For example, small businesses that don’t set up a budget for their company may find themselves stressed out when the year begins because they have no idea where all of their money is going (which can affect sales).
However, small businesses will always know exactly what needs to be done and how much it costs by setting up budgets throughout each month or quarter instead which means there won’t be any surprises down the road at tax time either.
Develop a Budget
Developing small business budget-friendly pricing strategies is key.
For example, small businesses that don’t set up their prices right might find themselves selling products and services for far less than they should be making instead (which means sales will suffer).
However, small business owners can easily make sure this doesn’t happen by setting up specific goals in mind before the year even begins and then adjusting accordingly when necessary which ensures there won’t be any issues whatsoever with meeting deadlines or paying bills either.
Select an Accounting Method
Entrepreneurs should always select an accounting method that is small business-friendly.
For example, small businesses that decide to use the cash basis for their small company might find themselves taking on more risk than they can handle down the road instead (which means sales will suffer).
However, small businesses are easily able to avoid this by sticking with either accrual or cash-basis accounting which ensures there won’t be any issues whatsoever when it comes time to file taxes at the end of each year too.
Reimburse Yourself When You Pay for Business Expenses
It’s important for small businesses to reimburse themselves when they pay small business expenses.
For instance, small companies that don’t reimburse themselves might find themselves missing out on a deduction at tax time instead (which can affect sales).
However, all entrepreneurs need to do is set up an automatic payment system in their accounting software which ensures there won’t be an issue with claiming deductions down the road either.
Ready to Begin Practicing These Small Business Accounting Tips
By following these small business accounting tips, you can better manage your finances and improve your company’s profitability. To learn more about this subject, continue reading our blog for more helpful articles.