Whether you are launching a small business, working for a few months or even years for your small/medium business, you’ll need to get on top of the accounting tasks that come along with owning a business. This short list of accounting steps will give you the confidence to know you’ve covered your bases and are ready to move on to the next item on your business’s accounting strategy to-do list.
Take a quick read on the top 5 accounting strategies that you should follow for your business,
1. Keeping business and personal finances separate
Having a separate bank account keeps records distinct and will make life easier when it comes to tax time. Separating personal and business finances also protects your personal assets in the unfortunate case of bankruptcy, lawsuits, or audits. Most business checking accounts have higher fees than personal banking, so pay close attention to what you’ll owe. Never make personal transactions using your business account. Check with your bank for which documents to bring to the appointment.
2. Determine the best method for Tracking finances
Bookkeeping is the day-to-day accounting process of recording business transactions, categorizing them, and reconciling bank statements. It also helps to prepare tax returns, and legitimize your filings. Bookkeeping is a crucial step that lets you monitor the growth of your business numerically.
You’ll need to determine how you want to manage your books:
- You can choose to go the DIY route and use software like QuickBooks or Wave. Alternatively, you could use a simple Excel spreadsheet.
- You have the option of using an outsourced or part-time bookkeeper that’s either local or cloud-based.
- When your business is big enough you can hire an in-house bookkeeper and/or accountant.
With so many options out there, you’re sure to find a bookkeeping solution that will suit your business needs.
There are two ways to manage your business accounting. Accrual basis method and Cash basis method. The difference between the accrual basis and cash basis methods is that, under the accrual basis, revenues and expenses are recorded when they are earned, regardless of when the money is actually received or paid. And the cash basis of accounting recognizes revenues when cash is received, and expenses when they are paid. This method does not recognize accounts receivable or accounts payable.
The cash method is best if you deal directly with customers and don’t get paid quickly. Accrual method can work well for large businesses, but it does have cons.
3. Select the right Accounting Software
From the start, establish an accounting system for organizing receipts and other important records. Selecting an accounting software isn’t that difficult. The right decision reaps benefits; the wrong one may leave you with a service provider that is useless and costly. Currently, businesses use a range of accounting software. Small/Medium businesses are most likely to use QuickBooks (43%). Other popular accounting software includes Xero, FreshBooks, Wave, and Sage.
4. Apply for funding
There are many scenarios where a growing business might need external business financing, be it through a line of credit, investors, a business loan, or even a business partner. Brands with big growth goals often need to secure funding to make investments in new product developments, inventory, retail stores, hiring, and more. Add up all the expenses you need the loan to cover, the expected new revenue you’ll get from the loan, and the total cost of interest using our business loan calculator.
5. Find high-quality accounting partners
As a business owner, you’ll need a little extra financial planning help or guidance, there are a few individuals you might want to consider enlisting:
- Accountant. Accountants can advise at many different points, including your business structure, creating financial statements, obtaining necessary licenses and permits, and even writing a business plan.
- Certified public accountant (CPA). In case of an audit, a CPA is the only individual who can legally prepare an audited financial statement.
- Bookkeeper. The bookkeeper manages the day-to-day records, regularly reconciling accounts, categorizing expenses, and managing accounts receivable/accounts payable.
- Tax preparer. Your tax preparer fills out necessary forms and may file them on your behalf during tax season. Some will also set up your estimated tax payments.
- Tax planner. These professionals help optimize your taxes before you file them, helping you learn ways to lower your tax burden.
Businesses that follow these accounting tips are well-positioned to claim significant tax refunds and benefits. Accounting for small/medium businesses does not have to be complex. If you take the correct steps in the beginning, such as conserving your records, it will be much easier for you to stay on the right path.
If you are looking for high-quality accounting partners to outsource your accounting and bookkeeping process, contact Kloudac Global.
Call: +94 777 870 464 / +971 5043 53515
KLOUDAC Global is a dedicated expansion of KLOUDAC, a recognized accounting firm with branches in Dubai, London & Colombo with 15 years of service experience. KLOUDAC Global mainly focuses on back office accounting with a whole package of services such as Financial Consultancy, Business setup, Audit and assurance services, Taxation services, Recognized accounting software, and more.