Small business owners aren’t accountants by profession. More often than not, they are not even from finance backgrounds. However, whatever their area of expertise may be, they need to learn the ins and outs of accounting.
Manual accounting goes as far as you are a small business operating with limited capability. But as soon as you think of scaling up, accounting tasks will seem a lot more daunting if you are not prepared for them. In such scenarios, small business accounting software is helpful to manage all the accounting-related activities.
But beyond that, there are some habits you should inculcate in yourself to be able to make the most out of the small business accounting software. Let’s look at five such factors that you should keep in mind about accounting to develop healthy accounting habits!
Separating business and personal accounts.
Mixing up the business and personal accounts can lead to some of the nastiest messiest financial blunders. The best solution to go about this is to establish your company as a distinct legal entity and open a business account as your financial hub. Use the business account for all the company-related finances. Make sure to not use that account for any of your financial expenses. Track the usage of your account separately.
Regularly creating profit and loss statements.
Profit and loss statements are important accounting tools that provide you with a comprehensive summary of your company’s expenses and income over a particular period. Generally, all public companies are required to release their P&L statements once per quarter, but small businesses aren’t required to create them by law. Despite that, P&L statements are great for being on top of your financial goals and ensuring healthy finances. The important factor is not creating profit and loss statements but creating them regularly. Individual P&L statements are not very valuable. Only when you make a quarter-by-quarter comparison do you get a holistic insight into your company’s finances.
Documenting all the expenses.
This is an important factor to consider, especially in terms of tax deductions. You are eligible for claiming many of your company’s expenses in the form of tax deductions, but that will not happen if you don’t have all the expenses properly documented. These expenses should include every cost that your business has to incur – from dinner with clients, ad budgets, office electricity bills, office rent, and so on.
Invoicing timely and accurately.
Invoicing can feel cumbersome and time-consuming, despite how utterly important it is. Plus, if you make silly mistakes in your invoices, it can put you at a loss. As a result of that, invoicing timely and accurately is an important factor towards maintaining healthy accounts. The invoices should be detailed, so much so that six months down the line, just glancing over an invoice can give you all the details you need to know about it. Invoicing timely and accurately will also put you in a better position to follow up with clients in case of delayed invoices, leading to better cash flows.
Streamline your accounting processes with small business accounting software!
The four factors mentioned above are without a doubt essential for healthy accounting and bookkeeping. But doing all of that manually is next to impossible. Luckily, you don’t have to do it manually anymore. Small business accounting software takes care of all the factors and more to keep your accounts up-to-date and your finances healthy. Explore various small business accounting software available in the market, and pick the one that fits your business needs. Start streamlining your accounting tasks, and free yourself off of a lot of useful time!