This is a collaborative post by Rosana Beechum with accounting tips for home businesses.
Starting a home business can be exciting and get you started on your dream of becoming a successful entrepreneur. While things like market research and product development are priorities, people often forget how important accounting is for small businesses. Understanding accounting will allow you to get a grasp of your margins, expenses, and net profit, and will also keep you compliant with the law. Here are a few essential accounting tips for small business owners.
4 Essential Accounting Tips for Home Business Owners
Start with the Right Accounting Software
There are tons of cloud accounting tools out there that allow virtually anyone to stay on top of their business’s finances and day to day operations. The best will also allow you to do things like time tracking while also allowing you to get all the tax deductions you’re entitled to.
If you’re looking for the best cloud accounting tool for your business, then read this guide from PieSync. You’ve probably heard Xero and QuickBooks being mentioned before. If you’re strapped for cash and are looking for a cheaper, then QuickBooks’s basic offering would be your best option since it has more features than Xero’s basic version. Xero, however, is much more user-friendly for small business owners, and you may not need all the functionalities of QuickBooks. Both tools are easy to integrate with CRMs, e-commerce platforms, and tracking tools, as well as email marketing tools. It would be wise to look at as many reviews of both as you can, so you can tell which one would fit more depending on your expertise and business.
Keep Track of all Your Invoices
Cash flow is the lifeblood of a business, and unpaid and late invoices could end up hurting you in many ways. This is why you need to always stay on top of unpaid accounts and do not allow clients to order more until they’re paid. If you’re offering some kind of credit, always make sure to set clear deadlines and penalties.
Keep Income and Borrowed Funds Separated
A lot of small business owners will make the mistake of keeping all the money coming in in the same basket, which could eventually end up in a financial disaster. Keep funds separate, and also use software that allows you to track both.
Review Your Books Every Week
Most entrepreneurs will agree that all business owners should review their books every week so they can get a clear view of what’s going on with their finances. This will allow you to keep track of unpaid invoices, cash flow, and expenses. You’ll also be able to get an idea of what kind of income you made this week.
Another way to keep track of expenses is to use a business credit card for all your business-related expenses. This will allow you to not only be able to monitor your spending better but could get you benefits in the long run, either through a higher credit limit or rewards that you could use towards business expenses.
Accounting should play an essential role in any business, and any business that doesn’t take accounting seriously is setting itself up to fail. Make sure that you follow these few simple tips and learn as much as you can if you want to be able to manage your finances and taxes better.