You probably started your small business because you had a passion for delivering goods or services to customers, and for being your own boss. Along the way, you probably did a good bit of research and heeded warnings from others pursuing the American Dream that running a small business is no simple task. Between retaining customers, dealing with taxes and laws and everything else, it can be difficult to keep up with everything you need to be doing.
One of the most vital aspects of your business that you simply can’t allow to fall by the wayside is accounting. If you aren’t regularly ensuring your numbers are accurate (and healthy), you could find yourself suddenly in a hole you didn’t see coming. While you may be able to dig yourself out, you may just end up burying your company instead.
While you may think only accountants can really make sure your business is financially on track, the truth is, you can do a whole lot on your own without adding another professional to your payroll. Take these 4 valuable lessons in accounting for small business owners to make sure you don’t make the same mistakes others have made:
- Your Primary Objective: Getting Paid
There was once a magical time called the 1980s and 1990s when getting a small business loan was pretty easy, and the interest rates were incredibly low. Matched with the fact that savings and checking accounts had high interest rates, there was never a better time to open a business. Fast forward to today, and cash is everything. Getting favorable loans is much more difficult, and banking accounts often have interest rates nearly equivalent to hiding cash under the mattress.
If you are going to pay your bills, you need to have cash on hand. That means you need to get paid. For those who sell physical goods or own a retail shop, this point may not be too relevant. But for those who send invoices for their services, you must prioritize getting those invoices filled. There are a few ways to do that.
First, don’t be afraid to charge — and enforce — late fees to make sure clients send their payments on time. Second, don’t make these charges a surprise; make sure your terms and conditions for payment are evident on the invoice. Finally, make it easy to pay you. Let them know they can send you a check, pay in office, use a card over the phone or online, or use a secure Web service like PayPal. The easier it is to pay you, the more likely you’ll get paid on time.
- Knowing Numbers Shouldn’t Be Torture
While you may not be an account wiz, you should at least know where you stand. If it hurts to deal with your finances, you’re probably doing it wrong in one way or another. For example, if you’re scared to look at your accounts, there’s probably an underlying issue there that needs to be addressed. Or, if you drag your feet to balance your spreadsheets, it may be because you don’t have any system in place.
There are great resources out there that can help you quickly and nearly effortlessly help you calculate financial data like cash flow. Even something as simple as a spreadsheet with which you can just plug in new numbers for updated projections instead of starting from scratch every time can make accounting much simpler. Whatever part of the accounting process feels like torture, find a way to make it easier so you don’t neglect it.
- Big Goals Are Good — But Small Goals Are More Achievable
As you sit down with your team or just by yourself to figure out where you want to be in a year or five, you probably create some big, lofty goals for yourself. For instance, perhaps you want 30 new clients and a total of $200,000 in revenue. That’s great! But you have to break that down by quarter and month to make sure you’re meeting your milestones along the way.
Think of your accounting tasks in the same way. You know you want to get your taxes done as painlessly as possible, and get as many write-offs as possible. But waiting until April 13 to start gathering all that information is a sure way to increase the chances of a mistake — or a missed write-off that could save you hundreds, if not thousands, of dollars.
Assign one day out of every week to work on these tasks. Compile a weekly list of expenses, invoices, cash flow and other factors and review your books for any mistakes every single week. As you get into this routine, you’ll be more than ready once Uncle Sam comes asking for his portion of your revenue.
- Accountants Are Helpful (To a Degree)
Accountants have one job: to handle your books. They make sure your accounts are balanced, nothing is outstanding and there are no errors. They also help look for tax breaks and other incentives so you can keep as much of your money as possible. However, it may not be all that surprising that their goals aren’t always aligned with yours.
The typical accountant has two goals: Do a good enough job to keep you coming back every year, and avoid any kind of legal action. The latter goal means they’ll help you get the typical tax cuts that are always available, but may not look for other breaks out of fear of doing something illegal. While you may love your accountant, it may be up to you to do some homework.
Get educated on the basics of tax law for small business. There are plenty of good websites out there that break it down into easy-to-understand language. Once you know what you could be getting from your taxes, bring it to your accountant so they can factor your concerns into their work. It can be a hassle, but it’s a hassle that can save lots of money.
Streamline Your Accounting with Company.com
We know all of these tasks take time and effort you’d rather be spending building your business and serving customers. That’s why we’ve partnered with FreshBooks to offer easy-to-use tool for accounting for small business owners that tracks your expenses, invoices and more and instantly updates projections for you. Contact us today to learn more about how we can ease the burden of accounting, or to start a free trial of our premium software package.