No one said starting your own company would be easy. Being your own boss means wearing many hats.
When you’re starting out having a full staff may not be an option. The first thought is that you can do it all yourself. Some things you will be able to handle on your own.
Other things might be best left to a professional, like accounting for small business. Let’s be honest, accounting is the most important part of businesses.
Hiring an accountant or a bookkeeper to keep your finances in order can cost money you simply don’t have in your budget. This is one task that you will want to consider for outsourcing.
Continue reading to see what you should be looking for when considering an online accounting service.
1. If You are in Business You Need an Accounting System
Don’t let anyone tell you that accounting for small business isn’t a big deal. Whether you hire a professional, use an accounting app or do it yourself, you must have an accounting process in place.
The last thing you want is to receive a letter from the IRS and not have your paperwork in order.
There are so many areas of your business that you will have to account for at tax time. How much money was earned, how much money was spent, and payroll are just a few.
If you do not understand the process, get with a professional to discuss your options. This will save you time (and money!) in the long run.
2. Never Mix Your Personal Money with Business Income
A common mistake small business owners make is mixing their personal finances with their business finances. Using the same account is a common mistake that can easily be avoided.
Having a business means having two separate accounts. Your business funds should be in an official account that is under your business name.
When accepting payment for services or a product those payments should always go into your business account. Checks should be made out into the name of the business.
If someone accidentally sends a payment in the business owner’s name, the check should be returned and a new one submitted. In cases where this is not an option, cash the check and immediately deposit the funds into the business account.
3. Make Business Purchases from Your Business Account
Part of opening a business banking account should include receiving a debit card in the business name. Getting a credit card or other accounts in the business name is also a best practice.
Purchases for your business should be made with your business credit or debit card. This will create a good paper trail for the business.
A good system used in accounting for small business will have a mechanism for automatically capturing purchases. Part of the process is to connect your bank account and credit cards to the accounting system.
This way, your accounting records will be updated daily to keep track of your business spending.
4. Do Not Pay Personal Bills with Your Business Account
Some business owners think that paying their personal expenses directly from their business account won’t go unnoticed. Think again, the IRS notices everything.
Be intentional with your spending and be sure not to cross the line between business and personal.
You should not pay your mortgage or car payment from your business account if they are not business expenses. The same is true for items like mobile phones, utilities and groceries.
Another temptation for business owners is to try and cover personal vacations and other entertainment expenses with their business credit cards. Remember, every line item has to be accounted for during tax season.
By using a professional service to handle accounting for small business, owners will catch transactions like these. Pointing out issues early will save you a lot of trouble down the road.
Once you have a better understanding of what is allowed and what is not, your purchases will become compliant.
5. Keep Up With Receipts
A part of accounting for small business is ensuring every transaction is reconciled with a line item. It is important to keep up with all receipts.
With today’s thermal and chemically treated register paper, it is common for receipts to fade. Having a system in place to record purchases is necessary.
A business owner can make paper copies of receipts, or create a digital image.
Technology has made it easy to link financial transactions to accounting programs. This only gives basic information such as store name, date, time and amount. There will be times when your accounting professional needs to see what items were purchased.
A good accounting program will use itemization to assist the business owner in tracking expenses for cost-effectiveness. Having line items helps you see expenses and make necessary adjustments in spending.
6. Payroll Expenses is a Big Part of Accounting for Small Business
There are many important aspects of accounting for your business, whether big or small. It doesn’t matter if you are a one-person team or have multiple employees, payroll is a priority.
Paying yourself or employees under the table should never be an option.
Processing payroll can be a daunting task. Today, many accounting programs come with a payroll feature. The right accounting service will check to make sure your taxes and benefits are being calculated correctly.
Even if you do not have regular employees on staff, you will still need to follow protocol when paying contractors, temporary employees and day laborers.
Establishing a salary for yourself and receiving a regular paycheck is necessary when it comes to accounting for small business. Doing so will make filing your personal taxes easier.
It may also reduce your risk of being audited.
7. Reporting Requirements
Depending on the type of business you operate you may have a long list of tax and business requirements to contend with.
Having reminders in place to keep you ahead of deadlines and compliance schedules can come in handy. Choosing the right accounting program can ensure those reminders happen automatically.
Some services will go so far as to provide useful tips on completing reports and filing in a timely and accurate manner.
8. Keep Track of Invoices and Payments
Outside of fulfilling a passion, the purpose of being in business is to make money.
Providing estimates, creating invoices and collecting payments all matter when it comes to accounting for small business. Being able to track all three is essential.
A good accounting service will make accommodations easily accessible. The process should be streamlined and convenient for both the business owner and customer.
Automation improves customer communications. It makes it easy for the business owner to create templates that are simple to use and requires minimal data input.
Features like online ordering and payment processing help you focus on providing your service or product. You’ll spend far less time mailing invoices and chasing down payments this way.
9. Having Expert Advice at Your Fingertips
Locating an accounting service that’s able to integrate with your accounting for small business program is vital. You will be able to handle your accounting in-house with the assurance of an accounting expert being just a call away.
There are different areas of accounting when it comes to operating a business. With the right company supporting you, there is always someone available to answer your questions.
It is also cost-efficient. You won’t have to worry about paying a full-time employee or an accountant’s hourly fee.
In addition, you will stay informed of the latest trends, accounting technologies and news impacting accounting for small business. Accounting services are familiar with a wide range of businesses.
Their programs and services will be catered to your specific industry.
10. Being Prepared When Tax Time Roles Around
We’ve saved the best for last. Preparing for tax season is not for amateurs. Having a state-of-the-art tax program backed by a proficient accounting service will cut hours off your processing time.
It can also save you a lot of billable hours if you hire a CPA to do your income taxes. Show up with a shoebox full of receipts or bring sloppy and incomplete records and you will pay for it.
When tax season rolls around, the data your accountant needs will be accessible through a few reports. The accountant plugs in the numbers and presents your completed tax forms for you to sign-off on.
Now That You Have This Useful Guide, are You Ready to Outsource?
No matter how you look at it, outsourcing your accounting is a win for your business. It saves you a lot of valuable time and money.
The goal is to find a small business accounting platform that can be easily aligned with trusted experts to handle the complex needs the will inevitably come up.
The powerful software behind ScaleFactor and their team of experts is your one-stop shop. They are compatible with popular accounting programs like Quickbooks and Xero.
If you are ready to take your accounting for small business to the next level, check us out.
It’s easy to get started with our new way of managing your accounting and finances. Complete the online form and a member of our experienced team will get back to you.
Isn’t it time you assure your accounting is accurate and healthy?