New business owners have many tasks to manage. One essential element they don’t always consider right away is the importance of small business accounting. Even if you’re a startup, it’s best to learn how to manage your books as soon as possible.
Why You Should Care About Small Business Accounting
Accounting for your business includes a number of crucial areas, including the following.
If you aren’t familiar with these and other accounting processes, you don’t really understand the inner workings and financial health of your small business. The following are some key accounting tips for small businesses and startups.
Open a Business Bank Account
Don’t make the common mistake of using your personal bank account for your business. Start off right away with a business account. Separating personal and business finances protects your assets in the case of bankruptcy or lawsuits. Establishing business credit also helps if you want to apply for loans.
Keep Track of Your Expenses
A key element to accounting is to get into the habit of tracking all your business expenses. Keep receipts and enter them into your accounting software or save them for your bookkeeper. This may include equipment, technology, office or warehouse space (including a home office), travel, and anything else that you spend money on for your business.
Identify the Best Bookkeeping Solution
To efficiently track your small business cash flow, expenses, and other data, you need to have a system in place. The basic decision you need to make is whether you want to handle your own books or hire someone to do it. If you want to save money, there are many accounting programs such as QuickBooks, that make it easy to track your accounting tasks.
If you decide to hire a bookkeeper or accountant, you can look for someone locally or a cloud-based professional. In this case, you’ll still need to save your receipts and keep all information related to your business finances well organized. For a bookkeeper to do their job, they rely on business owners to send them accurate and timely information and records.
Create a Payroll System
If you hire help, you need to set up a payroll system for tasks such as withholding the right taxes. Accounting software, as well as 3rd party payroll services, can automate payroll tasks.
Plan on Collecting Sales Tax
For local businesses, you simply charge the sales tax rate established by your state. Online, however, it’s more complicated as you have to charge customers based on their location.
Know the Difference Between Cash and Accrual Systems
Organize your books using the cash or accrual system. The cash method means recognizing cash in or out when it’s received. With the accrual method, payments and expenses are noted at the time of each transaction.
Understand Accounts Receivable
If you are in a B2B (business-to-business) industry, in many instances, your business customers will be dictating the terms of payment and larger businesses will often require extended payment terms such as 30-60 days. Accounts receivable will be one of your business’s greatest assets on the balance sheet, but depending on how long your business customer takes to pay, could create cash flow issues.
Look Into Small Business Funding
Small business cash flow can be challenging as you deal with all your expenses and aging accounts receivable. There are several types of funding you can explore, including traditional bank loans, crowdfunding, and seeking partners or investors. However, with bank financing being difficult for start-ups to qualify for and investors taking equity, there is another type of financial service B2B businesses should consider, invoice factoring. When you factor your invoices, you can be sure of getting paid on a consistent schedule rather than depending on your clients to pay you on time.
How Can Riviera Finance Help My Business?
Riviera Finance has been providing invoice factoring and other financial services to businesses in many industries for more than 50 years. To learn more about small business financing solutions, contact Riviera Finance.