Despite accurate accounting being one of the most important functions of a successful business, many new business owners struggle to keep their books up to date. By reviewing accounting information, business owners can make better financial decisions, as well as helping to report business success to stakeholders.
Accurate books can also warn the business owner and stakeholders of any future financial problems. Below are some useful tips to help new business owners’ manager their finances.
Use accounting software
The use of accounting software is commonplace amongst most businesses, and for good reason. It consolidates numerous bookkeeping processes in to one convenient package. Many software packages are located ‘in the cloud’, meaning they can be accessed from anywhere. This is extremely useful for business owners who travel often, and may not have access to the computer in their office.
Many accounting programs are inexpensive, and contemporary software often puts focus on ease of use and straightforward reporting, even for the novice user. The best accounting packages will include multi-currency support, inventory tracking, payroll functionality, a user-friendly dashboard, and expenses functionality.
Keep business and personal finances separate
It is not recommended to mix business and personal matters, especially in the case of finances. Even sole proprietors should separate bank accounts to ensure clarity and ease of bookkeeping processes. It is recommended that all records of transactions are clear (for accounting and tax reasons). To ensure this, all finances should be kept separate. Having a separate business account also highlights any cash flow problems that may be occurring, without outside influence from separate personal income.
Be strict with budgeting
Create realistic monthly and annual budgets; these will help you to work towards targets, stopping any financial problems in their tracks before they occur. Cash management is an integral part of running a successful business. Using monthly budgets allows business owners to identify any wasteful processes, thus helping the planning of future expenses.
Keep accurate and detailed records
Accurate records are often relied upon when preparing tax documents and business related expenses. By being strict with keeping detailed records early on, overall time is saved and processes are streamlined. The planning and preparation of detailed documentation makes the preparation of tax documents a pain free affair. Relating to the first point, many accounting software packages will have ways to keep detailed reports of all transactions.
Entrepreneurs and new business owners should use the financial tips above to stay focused on some of the more important aspects of running a newly started business.