Small Businesses Accounting Tips: How to Keep Your Finances in Order

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As a small business owner, you have a lot on your plate. From keeping track of inventory to managing employees, there’s a lot to think about on a day-to-day basis. One area that’s often overlooked is accounting. While it might not be the most exciting part of running a business, keeping your finances in order is crucial to the long-term success of your enterprise.

In this blog post, I’ll give you some tips on how to keep your small business’s finances in order. By following these tips, you’ll be able to save time and money in the long run. Let’s get started!

1. Keep Your Personal and Business Finances Separate

Many small business owners make the mistake of commingling their personal and business finances. However, this can lead to a host of problems, from difficulty tracking expenses to difficulty securing financing. It is essential to keep your personal funds and business finances separate.

The easiest way to do this is to open a separate business bank account. This will allow you to track expenses more easily and ensure that you are using business funds for business purposes only.

Additionally, you should get a seperate credit card for your business. This will help you to keep any of payments that need a credit card seperate as well. And don’t take business credit on your persoanl account.

2. Use accounting software

Another great way to keep your finances in order is to use accounting software. This type of software can automate many of the accounting tasks, such as invoicing, tracking expenses, budgetting and generating reports. By using an accounting system, you’ll be able to free up your time so that you can focus on other aspects of running your business.

Here are just a few of the advantages of bookkeeping software:

1. accounting software can save you a lot of time. Easily keep track of your income and expenses with good software.
2. accounting software can help you to become more organized. Easily see where your money is going and identify any areas where you may be overspending.
3. accounting software can help to reduce your costs. Rather than paying someone else to manage your finances for you, the software allows you to do it yourself.

There are many different types of accounting software available on the market, so be sure to do your research before selecting a specific product. One of our favorite software here at All New Business is FreshBooks.

FreshBooks is easy-to-use accounting software with bookkeeping features. Use it to manage and track:

• invoices
• expenses
• time tracking
• payments
• reports

It’s quite affordable too, with plans starting as low as $6 a month.

Related: The 9 Best Business Budgeting Software

3. Staying on Top of Taxes

In the realm of small business management, maintaining a vigilant stance on tax responsibilities is paramount. The financial success and legal stability of a small business hinge on the meticulous handling of tax obligations, including specific considerations such as Colorado sales tax. Diligently tracking income, and expenses, and adhering to tax deadlines not only ensures compliance with the law but also safeguards the business from potential penalties and legal entanglements related to state-specific taxes. Beyond regulatory concerns, a proactive approach to tax management allows entrepreneurs to optimize their financial strategies, capitalize on available deductions, and maintain a clear financial picture.

4. Hire an accountant or bookkeeper

One of the best ways to keep your finances in order is to hire an accountant or bookkeeper. A professional will be able to help you stay organized and ensure that all of your financial records are up-to-date. Additionally, an accountant can provide valuable insights into where your business is currently spending too much money and where you could save in the future. If you don’t have the budget to hire an accountant full-time, consider outsourcing this task to a part-time employee or freelancer.

5. Know where your money is going

You can’t manage your finances if you don’t know where your money is going. Make sure you keep track of all of your income and expenses. This will help you make informed decisions about where to allocate your resources. There are a number of software programs and apps that can help you track your finances, so find one that works for you and use it religiously.

6. Create a budget—and stick to it! 

Once you know where your money is going, you can start to create a budget. A budget is a roadmap for your finances—it will help you make sure you’re spending within your means and staying on track to reach your financial goals. But a budget is only effective if you actually stick to it, so make sure you review it regularly and make adjustments as necessary.

7. Stay organized

This one might seem like a no-brainer, but it’s important nonetheless. Make sure all of your financial documents are organized and easy to find. This will save you time and frustration down the line when you need to reference something specific. You might even want to consider hiring a professional accountant or bookkeeper to help you keep things organized (especially if your business is growing quickly). 

8. Keep proper business records

Related to the previous point, it is crucial to keep accurate records of your gross receipts, expenses, fixed assets, and income statements. This information will not only help you stay organized and on track, but it will also be essential if you ever need to apply for a loan or line of credit. Furthermore, by tracking your expenses carefully, you may be able to deduct certain items come tax time.

Therefore, I highly recommend that all small business owners take the time to establish a system for tracking their financial data. Doing so will save you a lot of headaches down the road. Using software can streamline this process, but you can also use a simple Excel spreadsheet. The most important thing is to be consistent in your record-keeping.

Related: Learn how to forecast your business

9. Use financial statements to evaluate business performance

If you’re a small business owner, then you know that tracking your finances is essential to keeping your business running smoothly. But knowing where to start can be overwhelming. Use financial statements to evaluate business performance.

There are three main types of financial statements: the income statement, the balance sheet, and the cash flow statement. Each one provides valuable information that can help you assess how your business is doing.

The income statement shows your revenue and expenses for a specific period of time. This can help you identify trends and spot areas where your business may be overspending.

The balance sheet shows your assets and liabilities at a specific point in time. This can be helpful in understanding your financial health and determining whether or not you have the resources to expand your business.

Finally, the cash flow statement shows how much cash is flowing in and out of your business. This is important to track because it can help you avoid running out of money.

Related: What is Cost to Company (CTC)?

10. Learn all the tax rules applicable to you

It is important to be aware of the different tax rules that may apply to you. The first step is to determine your business structure. Are you a sole proprietor, LLC, partnership, or corporation? This will dictate which tax forms you need to file. You will also need to obtain an employer identification number from the IRS.

Once you have all the necessary documentation in place, you can start keeping track of your income and expenses. Be sure to keep receipts for all business-related purchases, as well as records of any income received. When it comes time to file your taxes, having accurate and up-to-date records will make the process much simpler.

You can also hire a tax professional to help you with the more complicated aspects of filing your taxes. However, by following these basic tips, you can ensure that your small business stays on top of its finances.

11. Manage high-cost business expenses

If you own a small business, you know that expenses can add up quickly. Between the cost of inventory, labor, and overhead, it’s easy to let expenses spiral out of control.

However, by keeping an eye on certain high-cost expenses, you can help to keep your business on track. Labor costs are typically the largest expense for most small businesses, so it’s important to find ways to reduce those costs when possible.

One way to do that is by outsourcing work to contractors that bill at an hourly rate. This can help to reduce the amount of time your employees spend on tasks that can be easily handled by someone outside of your company.

Inventory is another common expense for small businesses. By keeping a close eye on your inventory levels and using just-in-time ordering practices, you can help to reduce the amount of money tied up in inventory while still ensuring that you have the products your customers need.

12. Know when (and how) to borrow money

Borrowing money is sometimes inevitable—but that doesn’t mean it’s always a good idea. Taking out loans or using credit cards can help you finance growth or cover unexpected expenses. But if not managed properly, debt can quickly spiral out of control. So before taking out any loans or opening any lines of credit, make sure you understand the terms and conditions (including interest rates and repayment timelines), as well as how borrowing will impact your cash flow.

The importance of Small business accounting

Following these simple tips can help you keep your small business’s finances in order. Though it might not be the most exciting task, staying on top of your finances is crucial to the long-term success of your enterprise. By hiring an accountant or bookkeeper, using accounting software, and staying organized, you’ll be able to set yourself up for success now and in the future.