5 Accounting Tips To Help Your New Small Business Succeed
As the owner of a new small business, you've probably been overwhelmed by the many different roles that you've suddenly had to take on. Perhaps, you didn't realize you'd be responsible for everything -- from your company's P.R. to its H.R to its IT departments, and everything in between. And as you've probably discovered, the hectic days of a business' infancy can leave you with very little time to deal with your company's accounting tasks.
Unfortunately, shoddy bookkeeping could actually lead to the downfall of your business. In fact, according to the New York Times, one of the top ten reasons why small businesses fail is because of poor accounting practices. Without accurate data on your revenues, expenses and costs, your company could end up so mired in the weeds, that recovery may no longer be possible.
So what can you do to help your new small business succeed? We recommend that you implement the following five smart bookkeeping and accounting practices.
Accounting Tip 1: Separate Your Personal Expenses from Your Business
In the early days of your small business, you probably bought some of your business-related items with your personal credit cards or out of your own banking account. But this is a practice you're going to regret when it comes time to separate your business expenditures from your personal transactions for your accountant. To make life easier on yourself and to keep your personal and business transactions apart, it's in your best interest to open a separate business banking account as soon as possible. And it's actually a requirement if your company is an LLC, a partnership or a corporation.
Having a dedicated credit card for your business is also a good idea. It will make record keeping much easier, as all of the expenditures on that card should be related to your company. In addition, many business credit cards offer detailed reporting to help you keep track of how your business is spending its money. Having a dedicated business credit card will also help build up your company's credit history. A separate business card is also a requirement if your company is a corporation or an LLC.
But don't choose just any card. Do your research and choose the business credit card that will offer the best benefits for your company. One card, for example, might offer a substantial signup bonus, while another might have excellent cash-back rewards or offer you a high credit limit. Some cards will even give you a small discount if you pay your card off early.
Accounting Tip 2: Set Aside Money for Taxes
Make sure to keep on top of your anticipated tax expenses and then set aside that amount each month in your bank account. While it may be tempting to spend that money on other more immediate needs, you don't want to have to scramble at the last minute to find the necessary funds to pay the tax man.
Accounting Tip 3: Know the Tax Credits and Deductions a Small Business Can Take
As a small business owner, there may be a number of tax benefits you can take advantage of. For example, you may be able to deduct expenditures related to your auto, phone, travel and even a portion of your house, if you have a home-based business.
Accounting Tip 4: Organize Your Receipts
Yes, in this digital age, it may seem positively archaic to keep paper receipts, but you're going to need many of them at tax time. And don't just throw these receipts in a shoebox. Make sure to keep them organized and to document on each receipt exactly why the expenditure was made. For example, if you conducted a business meeting at a restaurant, you need to record who you dined with and the purpose of your meeting on the receipt. This type of documentation needs to be done, if possible, contemporaneously with the transaction. Otherwise, it's just too easy to put a receipt aside and then forget a few months down the road the specific details of that particular expenditure. And, unfortunately, entertainment and travel-related expenses tend to be scrutinized extra carefully by the IRS.
Accounting Tip 5: Don't Try to Do Everything on Your Own
Another big reason why many small businesses fail? Well, according to Business Insider, it's because too many entrepreneurs try to do it all on their own. And it's not always possible. To succeed, smart business owners need to build a team of experts that they can rely on. This is especially important when it comes to your company's bookkeeping and accounting needs. Most entrepreneurs, for instance, just aren't aware of all of various tax deductions that they can take or how to manage financial risks with a strategic plan. But a professional accounting firm like Marek CPA & Associates can sleuth out the appropriate tax deductions or allow you to see the true financial health of your business. It's also important to work closely with your accountant throughout the year and not just at tax time. That way, you can stay on top of any financial issues that need to be addressed immediately.
Let us help you create a strategy that works for you and your business. Contact us today for a free consultation.