Whether your business revolves around a product or a service keeping track of your finances remains one of the most important factors of successfully growing the business.
When you are obsessed with finding new clients for your services or caught up in the product development process, book-keeping, and finances, in general, seem boring and unimportant.
After a while, you notice that tracking the cash flow is getting harder, and there is no clear picture of what you earn or spend. As you don’t have accurate financial records, you start wondering if you have any amount left for reinvestment or paying back to your initial funding sources.
That’s when you realize you should have at least kept track of your cash flow.
However tragic that may sound, it is never too late to start bringing your accounting to a proper shape. When newly starting, especially if you are the only one taking care of all business activities, there is no need to get into too much detail and integrate every accounting structure and process into your business. Just make sure you use the essential ones. We’ve put together a few accounting tips for you to consider when taking care of your business accounting.
1. Separate your personal and business finances
Separating business and personal expenses should be your first order of business as an entrepreneur. That doesn’t just mean separating it on paper and keeping all the money in the same place.
It is crucial to understand that your business is a separate entity, and you shouldn’t treat it as your hobby. Therefore you should run your personal and business finances separately. That will help you maintain a professional image and show that you’re serious about the work you’re doing.
Start with maintaining separate checking and credit accounts for your business finances. This way, you will eliminate the confusion between your personal and business finances.
Paying yourself a salary is another way of drawing a clear line between your personal and business finances.
At last, whatever you do, you must start tracking your spending and make sure your business expenses are covered with business finances and personal expenses with personal funds.
2. Pay attention to your book-keeping frequency
If you are the one maintaining your book-keeping, it may have the lowest priority for you. However, frequent book-keeping is vitally important to make sure you have a clear picture of the financial activities of your business.
You may choose to hire a professional for book-keeping, but even in that case, you should make sure it is done regularly.
3. Create a cash reserve
When everything is going well in your business, it is the perfect time for you to start preparing for emergencies, because you never know when those might arrive.
In other words, this means creating a cash reserve that you will be able to use in the event of an emergency, instead of turning to an external source for funding.
Having a cash reserve is essential not only for your business but also when managing your personal finances. Keeping some money aside will give you peace of mind in your day-to-day activities.
4. Set aside some money for taxes
Whether you are only starting your business or you are already a serial entrepreneur, you don’t want to mess with your tax payments and tax authorities.
If you don’t pay your taxes on time, no matter the reason, you will have to face penalties and additional interests on your original tax amount. To avoid that, you can set some money aside for paying taxes and go on with your usual business activities with a sigh of relief.
5. Make financial projections
Regardless of your current financial standing, preparing financial projections are necessary. These can help you budget for the upcoming years and even help you benchmark your current standing with the projections.
Comparing your current financial situation with the same of the upcoming years, you will have a clear picture of the changes you need to make. If you are not satisfied with the projections of your company’s financial situation, you can make the necessary improvements or modifications to your business to make sure it meets the goals you’ve set.
These are only a few of the things you will need to consider when starting a business, but if you consider these, it will be easier for you to go through all the other accounting processes.