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5 Accounting Best Practices for Small Business

Accounting Best PracticesAccounting doesn’t have to be complex or time-consuming.

For your business to be successful, you know you need accurate and timely financial information. The systems you implement today can mean the difference between surviving cash flow crunches or closing your doors.

As your business grows, you will have even less time to spend on accounting, and without organized systems in place things will quickly spiral out of control.

You will likely pay more in taxes than you need to, or worse, invite an IRS audit.

Don’t let this happen to you. Implement these 5 accounting best practices in your business today.

Invest in an Accounting Software Program

Too many business owners are still trying to get by using Microsoft Word for invoicing and Excel for their accounting.

Using the wrong tools for your business accounting doubles your work and worse – it allows significant errors to go unnoticed. Errors cost you time and money.

Investing in a quality accounting program like QuickBooks will help you save tons of time by reducing the time you spend entering data, checking your work, finding and fixing errors, and staying on top of your books.

QuickBooks incorporates several useful features, including:

  • Create invoices, collect payments, and print bank deposit slips
  • Download all of your bank and credit card transactions right into QuickBooks
  • Easily reconcile all of your checking, loan, and credit card accounts
  • Create and memorize reports, invoices, and bills
  • Exchange data with your accountant electronically
  • Run accurate payroll
  • Pay payroll taxes and file payroll tax returns electronically
  • Print checks
  • Pay your bills online
  • Accept electronic payments

Think Outside the Box

With QuickBooks, all most small business owners need to spend is an hour or two each week entering all invoices, checks, receipts, and bills. Enter the transaction and then file the paper away (or even better – scan and shred it!).

Do not use a file box or an old shoe box to store all of your mail and receipts until you get around to entering them. The more paper that piles up, the less likely you will ever spend the time to enter everything.

You’ll dread the box and avoid it at all costs.

Good luck figuring out what you’ve earned or what you owe at tax time!

Review Your Finances Regularly

Successful businesses review their budgets and finances each week, month, quarter, and year.

Incorporate regular financial reviews into your schedule as soon as possible. Meet with your accountant and other financial advisers at least twice per year to go over your numbers. I insist on meeting with my business clients at least one time throughout the year (other than at tax time) to avoid surprises and make sure everything is going according to plan.

To make matters worse, if you wait until after the year is over to meet with your tax adviser, it will be too late to take advantage of many tax planning strategies.

Mind the Details

Be as descriptive as possible when you are filling in a deposit slip or explaining a charge on an invoice. Take a few seconds to jot down any notes on a receipt that might be helpful later.

The IRS can audit you several years after you’ve filed your tax return. I don’t know about you, but I can’t remember what I ate for dinner last week, much less what I bought at Home Depot 2 years ago.

Little details like these will make all the difference if you need to refer back to something after months or years have passed by.

Manage Your Cash Flow

If you fail to manage your cash flow, you won’t be able to pay your bills on time, your employees’ paychecks will bounce, and you won’t have enough money to pay your taxes on time.

You’ll find yourself skipping your own pay, working more and more hours just to make ends meet, and being miserable. That’s no way to go through life.

Managing cash flow isn’t brain surgery. You’ll go a long way if you:

  • Set up a budget in Excel or QuickBooks and review/modify it regularly
  • Quickly create and send your invoices through QuickBooks
  • Get paid electronically (You can put easy online payment links on your invoices in QuickBooks for a small processing charge)
  • Offer your clients discounts for early or timely payments
  • Set up automatic checking or credit card charges for your monthly accounts to avoid lost invoices, forgotten payments, and unpleasant collection calls
  • Work with your vendors to adjust your due dates so that everything is not coming out of your account at the same time
  • Set aside money when times are good to so that you’re never caught by surprise and can manage downturns
  • And more

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