Best Accounting Practices for Small Businesses

January 22, 2017

Most small businesses have to do its own bookkeeping and managing accounts at the start. This is one of the toughest tasks many business owners face. Accounting is a very important matter for any business and it has to be done right for in-house financial and legal purposes. It’s not unusual for small business owners to be completely confused about how to do accounting right. If you are in this situation, here are several accounting best practises to consider to get your business books in order.

Keep Business and Personal Money Separate

This is common sense advice, but most small business owners fail to keep their business accounts separate from personal ones. If you are just running a one-person show, it may feel more convenient just to keep your business and personal money in one account. You may even use your personal credit card to make business-related purchases. However, don’t do this. It’s never wise to mix business and personal money for variety of reasons. There could be legal issues to face later on, and it will be harder to calculate business expenses and profits. So, even if you are the only employee at your company, open separate accounts for business purposes.

Hire a Professional

Small businesses may not be able to afford a team of ace accountants. However, if you are completely confused about bookkeeping, or simply don’t trust yourself to crunch the numbers correctly, it’s smart to hire an accountant. A single accountant may not cost much. You may be able to hire a freelancer on a part-time basis at an affordable rate. Local services, like accountants in Yatala, may offer special packages just for small businesses. It’s worthwhile to have a professional look at your books at least once a month. This is even more important if your business is growing.

Meticulously Keep Track of Expenses and Deposits

Say you buy a pencil for a dollar for your small business. No matter what a minor expense this is, it’s still a business expense and should be written down. You must keep track of all your business expenses with the same vigour as you do sales. Also, it may not occur to you at first to keep track of certain types of deposits, like business loans that goes into the company revenue pool. All expenses and income, regardless of size or nature, should be written down. It will be beneficial for you to understand the profitability of your business. And later this information will be required for legal and tax purposes.

Maintain Records of Inventory

Note down everything in your inventory, including purchase prices, sold dates, sale prices and stock numbers, to prevent misplacing items, theft and fraud. An organized inventory is paramount for a smooth running business. If your inventory is messy, then you will never be able to calculate the true value of your business.

It’s best to dedicate a time slot of the day or the week just for keeping the accounts. You can also buy basic accounting software that will automate many of the more time-consuming accounting tasks.

 

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