Managing money efficiently is essential for any business, but small businesses, in particular, are vulnerable to the effects of poor financial management. If you think that you and your business might benefit from some more disciplined accounting processes, this guide is for you. Accounting is too important to your business to be taking risks with. Fortunately, with a little guidance, any business can save money through better accounting.
Separate Business and Personal Funds
This is very important advice for freelancers and those whose businesses are in their earliest stages. When someone first starts a business, they are often using their personal funds to finance it. For many businesses, it will be some time before they are turning a profit and they may well be funded through the founders’ personal savings.
You should try as much as possible to have a clear delineation between your personal and business funds. You may need to spend from both funds in order to make things work, but you should try and record whether any money you spend is personal money or business money. The simplest way of doing this is to ensure that any money the business earns goes into a specific bank account. If you need to spend personal money on your business, move it into this account first.
Record all Your Expenses
It is inevitable that any business will have expenses, but running a business is never free. In addition to the usual day to day costs of your business, there will also be times when you need to spend additional money, sometimes unexpectedly. Regardless of the context, it is important that you accurately record and categorize all your expenses.
Find the Right Software
Having the right accounting software to work with can potentially make all the difference to the depth and quality of your accounting. There are a variety of apps and software packages now available to manage the accounts of businesses of any size. Searching through them to find the right one might take some time, but it is well worth it.
The right accounting software will make it more likely that your team record everything correctly and allow you to analyze your finances properly.
Look online to find out what software is available, then use user reviews and more in-depth articles to check which is the best suited to your business. Xero and QuickBooks are a good place to start, as these are both popular cloud-based accounting tools for business. You can read more here about Xero vs QuickBooks if you’re not sure which one to go for. PieSync’s article goes into some detail about both options, providing a basic overview as well as an analysis of specific features.
Always Update Your Forecasts
Your business should always have a plan of where it is going and what it is doing. In order to plan effectively, you need to have an accurate picture of your business finances. As time goes on, you will discover whether your past projections were accurate. You should regularly re-evaluate your projections based on your changing circumstances.
Putting the right accounting procedures in place is essential if your business is to maintain good financial health. Make sure that you are accurately recording every cent that goes in and out of your business and that you re-evaluate your goals and objectives regularly.