Small business accounting can be quite time-consuming, regardless of whose job it is to receive bills, pay bills, send invoices, and keep records for tax purposes. And because accounting doesn’t directly generate revenue, it’s easy to give it the back seat. It’s possible to streamline processes to keep the number of hours for accounting at a minimum and spend time on other tasks. This is true whether responsibility for accounting falls to the owner or if there is a bookkeeper to do the work.
Make a significant improvement in 2017 by putting the following principles into practice:
- Keep business accounts separate from personal accounts. Even the smallest businesses need a bank account for cleanly tracking income and expenses. And if a business owner uses a personal credit card for business purposes, then someone has to split out the business charges each month for reimbursement or tracking. So, keep it separate and save some time. This also applies to separate business entities. We often see the operating company paying all the expenses of the land-owning company if the business owner owns both entities. It might seem simpler but each should pay their own expenses.
- Pay with credit cards or debit cards for all expenses. Anything paid for by cash (not by check) is hard to track. People forget to document, and/or don’t capture enough information to make the write-off legitimate. It takes too much time to have to go back and create cash expense records – if anyone takes the time to do it.
- Scan receipts into a file or into the accounting system. Keeping all important data in one location makes it easier to collect at tax time or if the business is audited.
- Use accounting software. Some businesses do millions of dollars in sales out of a checkbook. But don’t be one of them. QuickBooks is the best-known accounting software, and there are others. Accounting software provides valuable report information about cash flow, payables and receivables, inventory, and more. Designate someone to be responsible for generating all invoices from it and enter each and every bill into it as well. Some software has the capability to directly scan a receipt or bill to enter it, which saves a lot of time. Make sure to properly train whoever will work on the accounting software. Hours of time are lost by employees who are trying to figure out how to perform a function that is covered in a basic training class.
- Understand which reporting features are most helpful for your business, and use them regularly. Staying on top of financials saves time in the long run because you have an ongoing sense of business status.
- Get rid of paper. Paper documents take up a lot of space and require time for filing. Scan documents and keep them electronically; it’s much easier and cheaper in the long-run.
- Find apps that make recordkeeping easy. For example, smart phone apps track mileage for tax deductions, separating into business, charity, and personal. Timekeeping apps have come a long way and many of them sync directly with invoicing or payroll portions of the accounting system.
- Outsource accounting functions. Do the math and it becomes clear that efficiency and productivity gain several hours of work per week. Consider the option to have an outsourced accounting firm set up and manage the accounting system. Then, count on receiving information that is helpful for running the business and filing on-time tax returns.
- Plan for tax time all year round. Being organized helps meet deadlines and avoid late fees. And a business is less likely to miss out on deductions if the business mindset is to capture that information as it happens.
- Meet with a financial advisor at least twice a year. A professional is another set of eyes for the business who can make valuable recommendations that keep a business in proactive, rather than catch-up mode. These meetings help keep the business owner be accountable to himself or herself and ensure they are taking the time to work on the business, not just in it.
Business owners and managers get busy and put off tasks every day. Take time now to create at least one of these new habits and reap the rewards.