As a small business owner, one carries out many roles when it comes to running one’s business. He directs his employees, works on new concepts and business opportunities, and, ultimately, makes sure that his customers are happy. Among these (and many more) essential responsibilities are the accounting of your small business. Supervising the finances of your company is undoubtedly one of the most important tasks you can perform as a business owner since money can contribute to the success of your small business. Randall Castillo Ortega, an entrepreneur and global trade expert, provides insight into how small businesses can properly manage their accounting.
Keeping accounting effectively is not an easy task, especially if finance is not your specialty. The success of the accounting of a small business implies a lot of organization and great skill in processes. From the preparation of profit and loss statements to preparing for the tax season, accounting is much more than keeping track of cash flow.
Keep an organized system in place. “Whether tracking the numbers is your strength or if you barely keep your bank account green, the organization is the key to practical accounting for small businesses,” explains Castillo.
Small businesses usually have several accounts to control, and things can get messy quickly. Minimize the space occupied by your accounting books by moving to a single repository to manage your company’s accounts.
Most accounts payable (and probably their own bills) are billed to customers online, which can make tracking accounts payable and receivable easier than in the old days of double-entry accounting with pencil and paper. Having a single cloud system in which you can have an overview of all your bank accounts and balance sheets, and access them from anywhere, is not only the way of the future but practically a necessity for small businesses.
This simple step can save you a lot of time in searching for specific transactions in your books and even make it easier for you to make budgetary decisions by having all the numbers in sight. The success of the accounting of a small business requires precision and a large organization, so prepare (and prepare your business) for success with the right tools to help you keep abreast of your finances.
Separate your company accounts from your personal accounts. It is easy to confuse the lines between what is yours and what belongs to the company when you run your own company. But separating business expenses from personal expenses is essential to manage your finances accurately. Keeping the personal bank account and the company’s bank account separately can help you keep the numbers balanced and also make sure that you comply with the IRS when claiming tax deductions for your business.
Expect the unexpected. Adds Castillo, “Although financing can be limited for small businesses, being prepared for high unexpected costs can be highly beneficial for the company in the long term.”
If there is one lesson that all entrepreneurs are familiar with, it is that Murphy’s Law is authentic. It seems that once an additional expense is incurred, such as a new computer or the repair of a computer, there are a lot of other costs that also occur. Being prepared for these expenses can help you avoid applying for a quick loan or ending up in debt with your credit card.
Make customers responsible for the invoices: Even if your company is constantly generating new business and satisfying new customers, your hard work may not count much if you let your customers slip on the bills. After all, turning paid accounts into profits is what keeps your business afloat.
Inventory equals money. Regardless of the sector in which you are located, it is likely that there are many resources and materials that keep your business running. Maybe you are in the restaurant industry and have to control food costs, or you are in the property management business and need to keep track of office supplies.
Whatever your specialty, you probably already know the importance of managing your inventory expenses. Maintaining a process to manage your resources and order new supplies can help you identify areas where you can limit your costs and maximize your cash flow.
Be smart with labor costs. Managing employees is one of the most challenging aspects of the operation of a company, regardless of the number of people it employs. Controlling overtime, profits, and other related costs is essential to balance your books and maintain the profitability of your business.
Set a minimum monthly benefit and a budget. Creating a budget for your company is one of the most critical steps that entrepreneurs can take to improve the accounting and financial situation of their small businesses. Preparing a budget is already a challenge, and even more so to making sure that the financial plan is being followed.
Hiring external accounting services for small businesses is an excellent way for small business owners to keep track of their accounts, prepare budgets and continue to have the freedom to focus their efforts on other important areas of their business.
Adhere to your plan by keeping track of daily expenses. Once you have developed a budget for your business on your own or with the help of a small business accountant, tracking your daily expenses is a natural progression on your path to small business success. Whether you keep a manual record or through an accounting software system, being aware of your company’s expenses up to the last penny will help you make adjustments to your budget, maximize your cash flow and predict your future profits.
Use your resources. There are numerous resources to help small businesses in all aspects of business management, including finance. Whether you join your local chamber of commerce or turn to online resources for help, there are lots of small business owners who understand the complexities of owning a business and tons of information to guide you to success.
Know when to call a professional. There are many tasks to manage, fires to put out, and benefits to accelerate. If you can’t devote all your attention to your company’s accounting, you may want to look for some options for outsourcing financial services.
About Randall Castillo Ortega
Randall Castillo Ortega has been involved in the financial space virtually his entire professional career. In addition to having founded the financial lending firm RACO, he is also an avid outdoorsperson and, along with his family, is a massive community supporter. He regularly participates in community ceremonies and events organized to drive a better environment for children and families.