Last Updated on Feb 28, 2020 by James W
A recent article in Forbes is premised on the position that accounting is, for most small business owners, an unwelcome headache. “It’s one of those back-office tasks that never cross your mind when you decide to run your own business, and yet it sucks up your day and makes running a successful business that much harder,” writes Kirk Simpson, CEO of Wave Accounting and a veteran of three startup businesses. He offers five common sense tips, summarized here, for keeping your small business finances in order.
- Keep it separate.Simpson is referring to your personal and business bank/credit card accounts. Putting a purchase for your family or yourself on your business credit card creates a complicated situation that could come back to bite you. “By keeping separate bank and credit card accounts for business and personal, you’ll save yourself hours of work and make it easy to keep track of deductible expenses in one place,” he says. “Some applications can automatically handle the behind-the-scenes accounting for crossover expenses, but even so, we recommend handling business and personal finances as independently as possible.”
- Call in a pro.There’s something about an accountant that endears them to small business owners. Perhaps it’s their facility with numbers and spreadsheets, or maybe it’s their superhuman ability to master the applicable tax laws and save you money. As tempting as it may be to keep the company books yourself, Simpson advises against it for cost efficiency reasons. “An accountant will almost always find more deductions and keep you penalty-free,” he notes, adding that you should strive to keep excellent records to keep your accountant’s billable hours to a minimum.
- Pencil it in.By “it”, Simpson means time to organize your finances on a regular basis — and he actually recommends that you use a permanent marker, not a pencil! Fifteen minutes a week ought to suffice, he maintains, giving you time to gain insights into your business that will enable you to make better-informed financial decisions and be organized when tax time approaches. Make it a priority and you should discover that your stress levels will benefit as well.
- Consider your people.It’s likely that one of your biggest business expenses is labor, so you need to properly track all aspects includingwages, benefits, overtime and payroll-related costs. “By tracking your spending on labor, perks and benefits, you may find you have more money to incentivize your employees — or that you’re outspending your budget. Either way, doing the math now can help you make better decisions later,” Simpson points out.
- Don’t forget to get paid.A shocking number of small business owners don’t stay on top of invoices and customer payments, according to Simpson.If you fall into that trap, it could be months before you realize you have outstanding invoices, which means you are probably collecting payments late and missing some altogether. Simpson recommends that you properly track all payments due and record when each invoice is paid, how long customers take to pay and which customers you’ve had difficulties collecting payments from in the past. In other words, leave no unpaid bill to chance because it’s money in your pocket!
About the Author:
Beth Longware Duff writes about payment processing and credit card machines for small businesses.