Date: June 3, 2022
Do you have the best accounting practices in place?
As a small business owner, it’s more important than you may realize to ensure you have the best accounting practices in place, otherwise, you may invertedly find yourself liable in lawsuits, be subjecting yourself to unnecessary audits, and hinder the success of your business. The future of your company relies on a solid financial foundation, it is literally the most important aspect of any business. It’s easy to get so busy running your business that the financial aspect can feel overwhelming and it may be tempting to just put it on the back burner or avoid it altogether. Here are some helpful tips to take the stress out of your business finances.
1. Hire a Professional -If your accounting is managed properly, you will have clear insight into your company’s financials without having to spend hours upon hours doing the books yourself. The most effective and efficient solution is to hire a professional. As your business grows, so will your needs. An expert will help make sure you are complying with federal and state regulations, and you will receive financial statements so you can see where you are at. A CFO can help strategize with you and advise you regarding growth strategies and how to set and achieve goals that help your business thrive.
2. Accounting Software – This is crucial and can save you hundreds of hours – even if you are just starting out and think you can handle everything with a spreadsheet. Invest in your business and yourself by getting accounting software as early into the business as possible. It helps keep you prepared for growth, minimizes errors, and gives you clear visibility into your organization’s performance. When you go to file your taxes, the process will be more streamlined and less stressful for you. Growing a business doesn’t have to be hard or confusing or stressful!
3. Keep Your Business and Personal Money Separate – This is so important, especially if you are operating as an LLC, S, or C Corporation. the last thing you want is to ‘pierce the corporate veil’. What does that mean? Basically, what it comes down to is that the IRS can disallow all of your business deductions if they cant reliably determine what is personal and what is business. That means you pay income tax on your total cash received, without any deductions! That is a whole bunch of headache you don’t even want to discover, I can promise you that. Furthermore, keeping clear lines between your business and personal finances will help you get a clear idea of how your business is REALLY doing so you know what to change if needed.
4. Familiarize yourself with your Financial Statements – Having accurate financial records and knowing what you are looking at sets you up for success in the long run. As a business owner, here are two financial statements you will want to get familiar with:
* BALANCE SHEET – This is a summary of your net worth essentially. This report lists out your company’s assets, liabilities, and shareholder equity (What you OWN, What you OWE, and What’s left over).
* INCOME STATEMENT (commonly known as the P&L, or Profit and Loss) – this gives you a summary of the revenues, expenses, and net incomes remaining during a specific time period (monthly, quarterly, etc.). (Otherwise, what you EARNED, what you PAID, and What’s left over).
Business owners wear many hats, every minute of every day. Protect and invest in yourself and your business, by hiring a professional. As you grow your business, finding a Virtual CFO or Controller will help you avoid costly mistakes and reach your financial goals. We love helping small business owners succeed, and if you are looking for someone to handle your monthly accounting, or advise you on the next best steps for your business we would be happy to help. Click here to schedule a complimentary