When it comes to making your own small business, the last thing you would want to think about is the accounting. Nobody starts a small business with the hopes of focusing on accounting. In fact, it’s quite the opposite. However, there really is no other way around it; you need to manage your debts and receivable one way or another. The following are some good tips for small business owners when starting up.
Hiring a Bookkeeper or Doing it Yourself
As the head honcho of your small business, you are probably all fired-up in wanting to do everything that needs to be done such as sales, marketing, and even accounting. This is also a good way to cut costs since you won’t have to pay for another person. However, when it comes to doing book keeping you can choose to either do it yourself or hire a freelance accountant since they have a better understanding on how to work with your accounts and books. Seeking consult from established accounting firms such as CPA Mason can help a lot even if you are doing the accounting by yourself.
Keep Track of Your Receivables
Seeing a long list under the receivables is a good sign that your business is potentially in good shape. However, until those are paid off, the long list of receivables won’t amount to much. Always keep track of your client’s payment status and try not to let them avoid their regular payment schedule.
Keeping Your Loans Separate and Accounted For
Most of the time, small business owners rely on capitals that are either loaned or borrowed from a third party. You might think that common sense dictates that these items should be separated when it comes to accounting but a lot of owners tend to forget this simple fact. Your loans should not fall under receivables since they aren’t profits. However, they shouldn’t be considered as ordinary capital since you need to pay them off later which means that they will later on be removed from the list and won’t help increase your business funds.
Keep Track of Day-to-Day Expenses
It is a better idea to keep track of your daily expenses rather than weekly or monthly. It might be easier to just go with the weekly approach since it coincides well with the payroll and client payments but it is a bit harder to get a concrete notion how your business is faring. If you compute daily, you get to see trends that can help you understand your business better.
Determine the Minimum Profit per Month
If you are trying to figure out how much you need to earn per month to ensure that your small business is not going in to the red, then things can get a bit murky. There are plenty of factors to consider and the only way to really know this is by making an accurate and detailed report of your expenses and costing. This amount then becomes a goal for you to strive for every month and can give you an idea if your business is improving or stagnating.