Getting your financial processes in order is a vital starting point for small businesses. Whether you’re just starting out or rapidly outgrowing the classic drawer of receipts, managing your accounting effectively is key to saving you time and stress. Understanding the accounting basics for small businesses provides you with the foundation you need to create workflows and standardise processes, ensuring that you’re never playing catch-up when tax season rolls around.
Accounting covers many business activities, from payroll to inventory to reporting. Here are some of the basics to consider when managing your accounts as a small business:
1. Open A Business Bank Account
Step one to handling accounting for a small business is having the proper accounts to manage. Opening a business bank account separate from your personal finances is vital for creating a separation between you and your company. Business accounts are available from many different banks, allowing you to select an option that best suits your needs and plans for growth.
2. Make Tracking Incomings And Outgoings A Daily Routine
Keeping track of what’s going in and out of your business is the foundation of good small business accounting. A good overview of the income you’re getting and the outgoings leaving your accounts is vital for understanding your current financial health. The more aware you are of your finances, the easier it is to make important business decisions.
3. Invest In A Bookkeeping System
A bookkeeping system does half the work for you by automating specific parts of the accounting process. Instead of manually entering information into a spreadsheet and calculating finances, bookkeeping software takes your financial data and provides all the necessary information. With many systems offering automation through bank account connections, a proper system can save you stress and labour.
4. Formalise Your Payroll Process
If you hire employees, ensuring they are paid correctly according to regulations, and legal requirements is a must. Formalising your payroll process is an effective method to ensure everyone is paid on time. Using payroll software or a template can ensure you account for all taxes and costs involved in payroll, ensuring you have all the information to be ready for the next tax year.
5. Put Preparations In Place For Taxes
A prepared business is a stress-free business. If you want to leave tax season anxiety behind, preparing ahead of time for your taxes is the golden rule. Bookkeeping software can provide clear insight into the business taxes you may owe if you ensure it is kept up to date. Ensuring all your information is reported, stored and easily accessible is key to making taxes plain sailing year after year.
6. Decide On Your Method Of Payment
As a small business, you can take payment from clients and customers in numerous ways. If you run an ecommerce store, you may use an online platform that processes payments for you. Some examples of payment methods include:
- Digital invoices
- Cash
- Online payment gateways
- Letter invoices
- Digital wallets
7. Review Your Accountancy Practices Yearly
Regular reviews ensure your accountancy methods are still working for your business. As you grow, change and evolve, adapting your financial processes is vital to ensure you remain in control of your accounts. Regular reports and annual check-ins are valuable to determine if your current methods still work for you.
Getting started in accountancy can be a hurdle for any small business. Ensuring you have the basics down provides the ideal groundwork for long-term financial success. If you require a helping hand, Blue Orchid can provide the support you need. Get in touch with us today to learn how we could help you.
Since 2011, Blue Orchid Accounting has been providing clients throughout the Central Coast with a comprehensive range of taxation and accounting services. We strive to provide friendly, straightforward advice, helping ensure you’re enabled to make smarter financial decisions and further safeguard your wealth.
