Running a small business means you often have to take care of everything yourself, even if you don’t have any experience.
In my experience as an accountant advising small business, I've noticed that relying on your own skills can be tricky when it comes to areas like accounting. Those without proper training often find accounting overly complicated and troublesome.
But it’s possible to run your accounts properly without going on a course – just follow these tips to ensure that your small business always adds up.
Ask for help if you need it
If you don’t really understand the taxes and can’t keep up with an invoicing system to save your life, you might want to think about hiring a bookkeeper. Many of my colleagues do that on a freelance basis, so don’t worry about having to deal with an employee if your business isn’t at that stage yet.
A bookkeeper will keep track of your outgoings and incomings, as well as whose payments are overdue and how much tax you owe at the end of the business year. This could be your easiest option, and though it may cost you, you can put the fees down as a business expense to help you with your taxes.
Keep track of what you owe
If you have had loans or financial backing to start the business up, keep this funding separate wherever possible. It really helps to know how much you owe and to whom, so that you don’t start getting it mixed up with the profits.
I often advise my clients to start paying this back whenever possible, so long as you follow the terms of the agreements that you have made. This helps you to understand a lot earlier exactly how much you are making. Remember that if you're using accounting software, you'll want to keep it all separate so you can see which funds are borrowed and which are receivable payments.
Use software
Talking of software, you'll probably want to invest in some. Doing everything with pen and paper is not very reliable, not to mention bad for the environment. A software system or an online system will help you to track every payment that you make and every payment that's made to you.
I always remind my clients to categorize both types of transaction properly in your software so that they can assess how much they are spending on each area of the business, and which of their products or services are the most profitable. Accounting programs work best when they are automatically synced with your business accounts so that you can do everything in a few clicks of a button.
Keep calculating
In the early days, it’s very important that you keep a close eye on those finances. Know how much you're spending on a daily basis so that you can keep a clear budget in mind for the weeks and months ahead, and cut out expenses that aren’t helping the business to grow, such as marketing campaigns that have not seen a good return.
At the end of every month, calculate your running expenses as well as the money you have made to see if there is room for improvement. Always know your target figures for sales so that you can stay on track – and have a backup plan if those targets are not met.
Staying on top of your accounts is possible, and it should be one of your main priorities. If you don’t know how much you are paying to whom, or how much you made in the last week, you need to review your books immediately. A successful business owner is on top of the finances at all times.
Jane Thompson
Jane Thompson is a writer and content manager for Uphours, an online resource with information about businesses.