Running a small business means that the owner will likely be forced to wear quite a few different hats of responsibilities.Â Owners frequently find themselves inevitably in the accounting role in hopes of saving money and many have a though time relinquishing the job of money management; this can be a scary thing for new business owners. Â Many business owners also think that just because their business is a small one, the accounting responsibility won't be too much work.Â No matter the size of the company there will be quite a bit of work ahead of you.
If you decide to take the path of in house accounting there are five elementally important things to consider before you tackle the task:
1. Insufficient Software
The accountants you'd rather not pay to track your accounting have just over a half a decade of higher-level education under their belts specifically in accounting.Â Having said that, there is no rational way that you can hope to grasp all of this information overnight.Â What you can do overnight is set up your company with some really dynamic accounting software.
There are hundreds of programs out there, frequently there are even programs specialized to different industries. Doing a bit of research to see which one is right for your company is absolutely worthwhile in the long run. The right software will be able your pilot on the often time tricky route to business accounting.
You're business is likely not in the business of accounting.Â Understandably for many business owners keeping up with the books can fall on the back burners.Â Worrying about keeping up with the income tax reporting or reconciling bank accounts don't seem so important, but playing catch-up at the last minute can make for a huge mountain of stress but also a wider margin for mistakes.Â The key here is to keep a consistent schedule, say 20 or 30 minutes a week to be sure everything is as it should be.
3. Missing Payments
Missing payments is a surefire way to finding your new company on your vendors blacklist.Â Would you want to do business with a company that pays you bills inconsistently and you have to pester to actually see your money?Â Probably not. Building a solid reputation within your community starts with those you do business with not only your customers.
Not staying on top of the financial aspect of your company is an extremely common killer for of small businesses.Â Defaulted payments on loans or credit cards could make it extremely hard if not impossible for your company to grow in the long term.
4. Poor Invoice Tracking
A business should be a business and not a charity!Â Staying on top of invoicing your customers is absolutely vital to healthy cash flow of any company.Â This is where your accounting software can really come to the rescue. Systematizing your invoicing process will make it much less likely to forget to send out an invoice. Also, automated reminders for missing payments can be a lifesaver to your bank account before it runs dry!
5. Not Drawing the Line
Even if you're the owner, operator and sole employee of your company, a separate business checking account is vital to the success of your business.Â Mixing your personal funds with the money flowing through your business is a recipe for disaster.Â Â Not only will this make your entire record keeping and tax accountability so much more simplistic it can also help ensure your own financial safety.
Of course business accounting is a pretty big task to undertake and should be looked into seriously before committing to do it on your own. Just remember, stay consistent in your practices, ask questions, and invest in the right accounting software. What other tips do you have for keeping the books? Share your insights in the comments and on our Facebook wall!
Adam Toren is an Award Winning Author, Serial Entrepreneur and Investor. He Co-Founded YoungEntrepreneur.com along with his brother Matthew. Adam is co-author of the newly released book: Small Business, Big Vision: “Lessons on How to Dominate Your Market from Self-Made Entrepreneurs Who Did it Right” and also co-author of Kidpreneurs.