The Great Regret Urges Plan Sponsors to Review their Benefits Lineup

Did you know that, according to the U.S. Small Business Administration’s Office of Advocacy, there are over 31 million small businesses nationwide? Overall, small businesses account for 99.9% of all firms in the U.S. economy.

Small business owners often wear many hats on a day-to-day basis.  As the CEO, marketing director and lead bookkeeper, small business owners are always looking for tips to help them run their business more efficiently.

Today’s article will take a look at some accounting tips that can be helpful to keep in mind.

It is important to keep your personal and business expenses separate. Business owners should open and maintain a checking account that is used solely for business activities.

In doing so, the owner creates a dedicated defacto accounting system that will save a lot of time and effort when preparing taxes as all business and income entries will be maintained one place.

Owners may still contribute personal assets such as cash to the business, but should do so only by depositing the contributed funds into their business account.   Maintaining records of such transfers makes it clear the owner’s intent to separate one account from the other.

If you own an asset that has both personal and busines uses, making sure business expenses related to the business use of that asset (i.e., a car) are passed through your business account will make tracking those expenses much easier and defensible.

Business owners should carefully track all business-related expenses.  Tracking isn’t difficult and can usually be accomplished using a simple system of categories under which typical expenses fall.  Accounting software packages can make expense tracking simple and effective.

Carefully tracking expenses is an easy way to forecast the businesses’ cash flows needs in the future.  As a business grows and matures, spending patterns often emerge.  Owners armed with this information can more accurately understand how to manage their company’s cash needs.  Understanding cash flow patterns is also important if a business owner wants to establish a credit line with their bank.

As with expenses, small business owners want to make sure they track all sources of income accurately.  Income in the lifeblood for a business and tracking it can help an owner forecast for growth and also plan when to make routine payments, including monthly and quarterly taxes.

Carefully tracking income also provides owners with information necessary for tax planning.  For example, a business owner with excess cash at the end of the year, may elect to purchase equipment in order to take advantage of depreciation deductions.  Doing so allows the business to purchase a productive asset and minimize taxes at the same time.

The highest and best use of a business owner’s talent is working on their business, not in it.  Although every business owner should understand their numbers and how cash flows into and out of their business, most are not seasoned accountants.  Enlisting the help of a professional accountant can quickly pay for itself.

Owners can make better and more timely decisions when they have high quality financial reporting to rely upon.  Over time, an accounting professional can become a vital team member, providing strategic planning and other financial advice that can help owners move the business forward.

Accounting software has become an indispensable tool for today’s small business owner.  Modern accounting software bundles include point of sale systems, forecasting modules, inventory tracking and invoice generation.  Some packages also help automate employee payroll and benefits administration.  Accounting software can also help a business owner track outstanding invoices by providing alerts when a certain timing threshold has been reached.

Quickbooks is a common accounting package deployed by thousands of small businesses in the United States. In addition to the core accounting software, Quickbooks works with third party application developers that design apps to expand the functionality of the software for specific uses.  One such application allows owners and employees to use a photo of an expense receipt and upload it into a predefined category.  Accounting software can make some of the most routine accounting tasks simple and efficient.

It’s easy to let things get in the way.  Small businesses have lots of moving parts and its easy to get pulled into dealing with what is right in front of you at the moment.  Successful business owners spend some time each day working “on their business” and not working “in the business.”

It may be as simple as calendaring a specific time on a specific day of the week to make sure the company’s books are updated. or taking an hour once a week to study the latest financial statements. Good things come to business owners that dedicate time to making their businesses better.

Employers pay their share of employment-related taxes, generally on a quarterly basis. Sales taxes and other tax obligations may be due on different time frames.

It is extremely important to make sure that recurring taxes are paid when they are due to avoid penalties and other negative consequences.

Successful business owners are always aware of these deadlines and never miss them.

It is important to keep your personal and business expenses separate. Business owners should open and maintain a checking account that is used solely for business activities.

In doing so, the owner creates a dedicated defacto accounting system that will save a lot of time and effort when preparing taxes as all business and income entries will be maintained one place.

Owners may still contribute personal assets such as cash to the business, but should do so only by depositing the contributed funds into their business account.   Maintaining records of such transfers makes it clear the owner’s intent to separate one account from the other.

If you own an asset that has both personal and busines uses, making sure business expenses related to the business use of that asset (i.e., a car) are passed through your business account will make tracking those expenses much easier and defensible.

For businesses that maintain inventory, managing this asset can be a full time job especially in today’s reality of disrupted supply chains.  Closely monitoring inventory levels allows a business to assure that operations can continue unimpeded.  Most accounting packages include some level of inventory tracking.  In some industries there are specialized software packages designed to handle the specifics of that industry.

Closely tracking inventory serves several functions.  Beyond making sure that there is product to sell, well maintained inventory systems help assure that production schedules stay on time.  Inventory tracking can help tell a business owner when certain items in inventory have become stale or obsolete. In addition, inventory tracking can also help reduce waste due to theft and loss.

Most business owners know that simply sending out an invoice doesn’t automatically mean that they are going to automatically receive a check.  A large part of business is making sure that you get paid. Carefully tracking outstanding invoices is important to keep cash flow crunches to a minimum.

Historically, business that stay on top of their invoicing tend to get paid more quickly and with less time spent on the collection process.

It is important for a business to establish a reputation for closely monitoring accounts.  The process does not have to be complicated and could be as simple as sending reminder emails once an invoice is outstanding for a predetermined number of days.

Now that you’ve learned about the essential accounting tips for small businesses, you might want even more than accounting tips. Maybe you want to hire professional accounting services that can help you manage your small business’s accounting needs.

In this case, you should look no further than SSC CPAs + Advisors.

We are a regional team of CPAs and Advisors who are dedicated to serving your business and family for generations to come.

To learn more about how we can help you, contact us now.