Small Business Accounting Best practices
Businesses owners and entrepreneurs especially if you just starting have many responsibilities and often find oneself wearing many different hats. Whether its designing and developing a product, branding and marketing a service, appointing new staff, client relations and the list can go on, these responsibilities can keep you occupied all day long amongst them the books. Unless accounting is your specialty by profession the thought of Financial Analysis is probably daunting but nevertheless a critical part of the functionality of the business. Neglecting bookkeeping for small business sme accounting as result has a major repercussion, such as losing reports on all the hard work you already invested in the business. We at Andisa CASA understand that wearing so many hats are not easy thus we have prepare this check list of 20 Best Practices on small business accounting to guide you establish sound practice on accounting for small business function.
Start right! Procrastination is a bad habit we all been guilty of at least once in our lives especially things we do not have interest in or we predict to consume too much time we deem could be better spent on thing we enjoy more but Accounting should not be one of those things and should be amongst the things on of your list as high priority.
As mention above Accounting is a critical part of the functionality of a business in order to sustain good company health, maintain profitability and establish room for growth.
2. Time Management
As a business owner or entrepreneur one can easily get side tracked by new ideas that one easily forgets of the important task at hand.
monthly management accounting for small businesses
It’s important to make a checklist prioritize the task at hand that way you ensure that everything gets done. When it comes to accounting one often needs supporting documents. One should ask questions like do I know where to find it? Is it filed? Do I have soft copies? By doing this you spending your time more effectively and efficiently.
3. Invest in the right Software
In the world we live in today technology has evolved to assist us in making our daily operations much easier including your Accounting functions. It is important to have the right software and accounting program that meets all your needs and potentially add value in some way.
There are varies accounting software on the market tailored to meet the different needs of different companies in different industries and of different sizes, with the different tools and modules, one can tailor it even further to be unique to the business you as an entrepreneur developed. By using the right accounting software, by not just settling for the cheapest one you ensure that your company has the best solutions to problems it potentially will face and ensure that the latest rules and regulations are applied.
Accounting software today has added the extra bonus of minimizing space by offering accounting programs to you that can be accessed online by more than one user at the same time in addition to automatic backups making filing and space a problem of past. With the encrypted codes and networks investing in the right accounting software is the safer than the old school pen and a book, promising accuracy, and sufficiency.
4. Stick to the Budget!
Yes, I know I might sound as I am contradicting myself but cash flow is an important part of the functioning of any business, try the software, for example, yes invest in the best is important but the best that the company can afford is important.
It’s better to try and buy it in installments than everything at once. Buy only what you need. For example, if the company is still small and it is in the delivery business with only 12 drivers there is no need to buy 20 trucks. One can always purchase more when they company grows or sell the smaller trucks for bigger ones when needed.
This way the company reduces the expenses to what is absolutely necessary for the operational activity to take place. And the company is not put under financial strain causing the company to potentially stop production of being able to pay overheads.
5. Rely On Experts
When going to a doctor you are more likely to choose one with more experience and expertise in a particular field so why not do that same with your books get a legal bookkeeper Cape Town or qualified Accountant to assist you with outsource accounting or even better get a Chartered Accountant like us at Andisa CASA. It is better to get it right the first time around to avoid more expenses and/or potential setbacks and delays.
6. You are not your business.
Many entrepreneurs make the mistake of not separating personal expenses from business expenses sugar coating it by saying they invested so much time money effort and knowledge into the business but in fact if this is your way of thinking to stop it NOW! You own, direct and represent your business but you are not your business. By mixing personal and professional lives business owners throw away all the hard work they put in and potential profits that the business could be reaping.
Pay yourself some form of income whether it is a salary, wages or some form of repayment even though at some point you might have to invest the money back into the business. This way from an administrative side doing the books will be so much easier and have to provide supporting documents in a case of an audit so much more accurate.
7. Track your expenses a small business accounting best practice
It is important to keep track of any business related expenses, by keeping slips and invoices as mentioned above by keeping business and personal transactions separate because it can potentially benefit you for more efficient Management Account or financial analysis in addition to this it can be beneficially for tax related purposes with SARS.
8. Organisation on sme accounting
It is by law that the accounting for small business records should be kept for at least five years. Having said that, five years can amount to a lot of information not to mention paperwork. Sme accounting is of utmost importance, keeping a good filing system in place both hard copies and soft copies of all invoices, payslips, credit notes etc so that there is always a backup available. As mentioned above, if ever the company or business get audited by entities such as SARS you will be able to provide source documents hassle free.
9. Financial Time
As a business owner, it is important to stay on top of your game. As a business owner, you make decisions on a daily basis that can either affect the business positively or negatively. Accounting is as critical part of the functionality of any business as repeatedly mentioned above and thus you as the business owners should make monthly if not the weekly time to see what is happening in your books, this way it will ensure that the decisions you make are informed ones.
financial analysis, financial statements and tax consulting
You can always get assistant with interpreting Financial analysis from your accountant. Andisa CASA make it part of our monthly retainer to interpret and advice based on the Financial Analysis. Small business accounting services to clients should be like a relationship between accountant and client. There must be sessions to discuss your performance and profitabilities on month to month bases.
10. Plan Ahead As a business
The end goal is to grow financially and expand the business physically but to get there are many things one need to tick off along the way and the only way to do so is to plan for it. For example, to grow people need to know about your business – for people to know about your business you need to advertise – to advertise you need money and a target group – to target the correct people you need the right platform to get the wanted audience – to get the wanted audience you need to research in other words plan.
11. Jargon accounting for small business
It is important to formalise yourself with accounting terms so that you are aware of what report you are required to provide requesting entities such as credit providers and potential funding organizations. For Example, Financial Statements is a summary of the annual activities and profitability amongst other things in a report format and can be used to determine the solvency, liquidity, and profitability of a company. Our small business accounting or bookkeeping for small business provides extensive annual financial statements that reveals key financial indicators at its simplest terms. SME accounting reports should be very simple. If you are struggling to understand any accounting for small business report don’t hesitate to request for narratives.
12. Payroll Systems on bookkeeping for small business
Payroll is part of most company’s growth because to grow more people is needed to perform the task or produce a product. There are many companies like as at Andisa CASA that can do your payroll for using state of the art payroll systems with the clock in systems making tracking employees hours easier and more accurate saving you time and even banks now have an option where you can pay all your employees with a click of a button.
13. Automated payments and invoices
Get with the times and use the tools and innovations available to you such as recurring invoices being sent out automatically on a certain date or put debit orders in place.
14. Shorten Payment terms
Having a positive cash flow it essential to any business to increase the successful potential rate. Ensure that you keep these credit terms at a minimum or make payment arrangements such as debit orders. There is even an option on some sage programmers where you can link a payment platform on your invoices you send out to clients making retrieving payments hassle free. In addition, it is important to maintain a good client relationship with regular clients ensuring on time payments from them, just try to keep the relationship professional as possible as things get tricky once it gets to a personal level.
15. Maintain Receivable Balances
As mentioned above the market of people preferring to purchase items on credit large so for business purposes it is good to allow these types of transactions, but in doing so in the same breath putting regulations in place such as a deposit fee, credit limits, debt orders for ensuring regular payments and as an extra benefit commission for allowing the credit overdraft and interest and penalties on late payments and credit balances.
16. Recover Receivable
Systematically Ensure that you have a clear communication line between you and your clients this way when you are faced with making an inquiry about an overdue balance you are more liking to get good feedback and arrangement can be made to work effectively. Yes, the overdue money is yours but remember that client relationship is very important as at the end of the day word of mouth is the best form of marketing. Keep an eye on the tone you use when communicating.
17. Record deposits correctly
Ensure to maintain a clear description of every transaction in your small business accounting books. As mentioned previously that sound accounting records are essential to the functionality of any business. Thus when a deposit is being made ensure that the description indicates what the transaction relates to.
18. Delegate responsibility
As I mentioned in the beginning as an entrepreneur and business owner you wear many hats and take on varies responsibilities but at the end of the day we are all human and it is impossible to do everything by oneself. In fact, you are more liking to make a mistake or uninformed decision when one is tired and overworked. Find an accounting firm that understands your need on small business accounting and your determination to grow that you and trust will deliver a service of an exceptional standard. Bookkeeping for small business that not even you could have done better.
19. Do Not Wait for The Due Date
When it comes to taxes it is better to submit as soon as you have the required information available. This way if the business happens to have a liability the business has sufficient time to budget for it and pay it over a period of time instead of depleting the cash flow. In the case of a refund, there is a limited time in which one can submit supporting documents failure to do so means that one may forfeit the potential refund for SARS. We at Andisa CASA assist with Tax Services Cape Town aiding our clients in staying compliant at all times.
20. Figure Out a System to handle accounting for small business
That You Can Scale Lastly it is important to keep in mind that whether you are appointing an Accountant, Accounting firm or a bookkeeper that handles bookkeeping for small business or accounting for small business, think ahead where you want your company to be in five years and ensure that both your software and your accountant knows what the end goal is and is able to adapt and grow with you as a business. We at Andisa CASA stand and strive for growth not just as an Accounting Firm but for our Clients as part of our Accounting Family.
Let us manage your books today. We engage you on sound business advise and coaching
As Andisa CASA means GROWTH. | Small business accounting