The Small Business Administration says that 82% of businesses close because of cash flow issues.
These businesses didn’t have a good accounting strategy to manage the financial side of the business. They could deliver the best service, but still couldn’t make it work.
That’s every business owner’s fear. They invest blood, sweat, and tears to build a great business, only to close because of financial problems.
Don’t become a statistic. Keep reading because it’s time to learn accounting strategies for small business.
1. Separate Business and Personal Accounts
It might seem like a big hassle to separate personal from business expenses, especially if you’re just starting the business.
It’s the best thing you can do for your business. Comingling accounts can make you personally liable for any business issues.
Bookkeeping and tax recordkeeping also become more challenging. It will be difficult to figure out your business and personal expenses if you ever get audited.
2. Find a Qualified CPA
It’s critical to find a qualified CPA to help you manage the financials of your business. Without that help, you’ll be left to figure out business taxes on your own.
You’re likely to make mistakes or miss out on valuable deductions. A CPA helps you stay on track and keep your accounts organized.
They’ll help you create a chart of accounts for your business, so you can easily categorize income and expenses.
3. Create Cash Flow Systems
Smart small business owners use systems to manage cash flow in the business. They have different accounts set up and put money in those accounts as soon as they get paid.
They’ll put a certain percentage into an account for taxes, another one for emergency funds, and another one for operational expenses.
There are systems like the Jars system or Profit First that you can use to create cash flow for your business.
4. Anticipate Challenges
The more you can anticipate financial challenges, the easier it is to respond with smart decisions. For instance, your business may be seasonal. You can anticipate when the slow and busy seasons are.
Financially sound businesses know their tax obligations and how changes to the tax code impact them.
If your business has a lot of chargebacks, you can anticipate issues regarding compliance deductions. You can create a workflow to meet these challenges head-on.
5. Review Financials Monthly
Financial management needs to be part of your regular routine. It’s so much more than reviewing your bank account and deciding that you have enough money to make a purchase.
Review your financial reports each month. Check your profit and loss statement, cash flow, and balance sheet.
Don’t leave tax planning for the end of the year, either. Make sure you meet with your accountant a few times a year to review your financial project reports.
Create an Accounting Strategy for Your Business
If you want to have a stress-free business, you need a sound accounting strategy. The business accounting tips in this article which accounting strategies for small business to start with.
Be sure to check out the home page of this site for more business tips.