Running your own business is a constant balancing act. Between managing your team to generating leads and tracking inventory, the last thing you want to think about is managing your finances. But as most business owners know, effective accounting is the difference between a dwindling business and a successful one.
If you’re not one for crunching numbers, or just need some high-level guidance, we’re here to help. In this post, we’re clueing our entrepreneurial audience into four financial tips to make money management much more manageable.
1. Get organized first
Beyond the equations and financial projections, one of the most challenging aspects of small business accounting is just getting organized. Whether you sell a single product or service or offer a well-stocked supply of several, it can be a tough task to get your books all aligned. But being able to access important statements and draw clear lines between accounts is vital in making sure your projections, taxes, and payroll is accurate, just to name a few!
To start the organizational process, heed to these guidelines:
- Always keep your personal and business finances separate. Even if you’re a pass-through entity, dividing the two will be much easier when it comes to filing your taxes, paying your employees, investing in your business, and paying yourself.
- Use accounting software to help you manage invoices, payroll, and generic accounts. Being able to locate specific transactions comes in the clutch if you ever find yourself in an audit or find an error in your financial forecasting.
- Keep records in a locked, fire-proof document safe to ensure that you can refer back to important information, such as your business license or an insurance policy, even when disaster strikes.
Once you’re able to get completely sorted, it will be much easier to either tackle your bookkeeping on your own or pass it off to a professional.
2. Enlist the help of a professional
Oftentimes, small business owners are too busy to do a detailed job of accounting; all great accountants know that the devil is in the details! If you’re already overwhelmed or don’t feel like numbers are your strong suit, it’s probably worth hiring someone to help.
Now, there are several finance professionals to choose from, depending on your needs:
- Financial advisor: Advisors are kind of like the jack-of-all-trade professionals in the finance world. They can help you strategize your initial capital investment, evaluate your business model’s profitability, and assist you with budgeting.
- Sales tax consultant: These tax pros can help you assess your liability for paying sales and use taxes according to the government tax code. This is especially important for business owners to get right because no one wants to deal with an IRS audit.
- Bookkeeper: These individuals can help you manage and track your incoming and outgoing dollars, keeping you organized and on top of your invoices.
- Accountant: Bookkeepers are often confused with accountants, but they actually serve two different functions. While bookkeepers help more on the administrative and organizational duties, accountants typically take on budgeting and strategy for the business’ financial needs.
3. Figure out where you can cut costs
Most small businesses operate on pretty narrow profit margins, so it’s important to constantly consider where you can cut costs, within reason. Things like saving electricity, minimizing subscriptions, and allowing employees to work remotely are great options to save money! Conversely, sacrificing on product quality or fair compensation are areas within your budget that you probably don’t want to thin out.
4. Always be thinking about the future
If there’s one thing 2020 has taught us, it’s that hindsight really is 2020. While you can’t go back and alter the past, you can most certainly plan for the future. As you create your financial projections each year, make it a point to get your team together and devise how your company plans to evolve with new technology, changes in your industry, and emerging competitors. Figuring out if you can expand your services or improve your product ahead of time almost always pays off!
What’s your biggest pain point when it comes to managing your business’ accounts? Open up the discussion in the comment section below — and don’t forget to tell us your favorite of these four financial tips!