Plenty of small business owners wonder how they should tactically tackle their accounting. They also post this question to their peers, their advisors, their mentors, Google, the internet at-large, small business forums, Meetup groups, email listservs… there are probably even a few accounting-themed prayers uttered every now and then. And while every business is going to require a slightly custom approach (because all businesses and business owners are different), there are a few tactics that every entrepreneur can implement to go about their books confidently…
Invoice as Soon as You Can Invoice
Waiting to send an invoice until long after it’s appropriate to send the invoice is only going to have negative outcomes. Not only are you extending the time it takes to get paid, but you’re also running the risk of actually forgetting to send the invoice. Get in the habit of firing off the invoice as soon as it’s OK to do so. How do you gauge when that is? If you’re a service provider, send it off as soon as your work is complete. (Picture an independent exterminator who’s just finished treating a house. They put down his or her exterminating gear, pick up an iPad and tap out an invoice right then and there.) Similarly, if you operate more in a consulting role, set your invoice send date and net payment terms in the agreement you sign with your client at the outset of the relationship. It’s then your job to send invoices on time and theirs to pay on time!
Capture Expenses in the Moment
Raise you hand if you love coming back from a business trip with a wallet or purse full of receipts that you need to organize and enter into your accounting system? Oh? No one loves this? That’s exactly why you should capture an expense when you make the purchase. Whip out your smartphone and snap a picture of the receipt as soon as you get it. You will thank yourself later.
Deposit Payments When You Get Them
Ideally, you’re receiving payment on invoices digitally (i.e., bank-to-bank transfer) but if you do still take cheques, deposit them as soon as you get them. If you’re concerned about excessive trips to the bank, find out if your business bank has mobile deposit. (Pro Tip: If your bank does have mobile deposit, get familiar with the daily and monthly deposit limits that may (likely) come with it.)
Review Your Cash Flow Weekly
Obsessing every day over your cash flow won’t get you far. Instead, review your cash flow weekly. This will allow for transactions to process. Why bother with reviewing cash flow? Cash flow gives you a real-time look into the money in and the money out of your business. Sounds like that’s worth knowing, yes?
Stay on Top of Your Tax Obligations
For most small businesses, tax related activities are not just limited to the annual filing deadlines. Rather, tax tasks rear their pretty little heads regularly throughout the year. For example, if you a “sole proprietor, partner, S corporation shareholder, and/or a self-employed individual” in the United States, you need to be aware of estimated quarterly tax payments. The same can be said for Canadian business owners and obligations related to GST. When you’re aware—and on top—of your business’s tax obligations you’ll find yourself getting a lot less mail from various revenue departments.
Measure, Measure, Measure
You can make a lot of movement but not make much progress. Comparing your financials is one of the best ways to gauge whether or not your business is making progress (however you’ve defined that). When a quarter closes, compare it to the last quarter. Then compare it to the same time frame last year. You can do the same for the year too. Take notes on what was different. Did a decline in customers drive your revenue down? Did you incur more expenses? Simply put, always be measuring your business so that you can make adjustments as needed. The primary business financial reports can be a big help when it comes to measuring.
These are some of the most universal, straightforward tasks that, when implemented routinely, can help every small business owner confidently build a great business.
Reprinted from Kashoo.com, makers of cloud based accounting software. The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.