How to Save Money by Doing Your Own SMB Accounting
Accounting is one of the most complex business functions in existence. It’s a challenging task for business owners who would instead put finance in the hands of professionals.
But doing so can cost money you don’t have, particularly in the early stages of a business when expenditure needs to be kept to a minimum.
Considering there’s so much to take into account, including compiling reports, tracking expenses and understanding tax regulations, how could you possibly do your own accounting without the requisite knowledge?
Well, fortunately, modern software is sophisticated enough to process your information for you. This will enable you to focus on your core competencies while simply entering the relevant data into accounting software of your choice.
Keeping a positive cash flow will help your business stay afloat, but how exactly should you manage your accounting function in a way that saves you money?
Separate Personal and Business Spending
Opening a business account is one of the first logical steps when starting a business. This should be separate from your personal account for a few reasons, including the maintenance of personal liability protection if someone files legal action against your business.
Splitting your spending makes sense in the long run, especially since you won’t have the headache of trawling through countless personal banking statements to find business transactions.
Failing to separate your finances can set you up for inaccurate reporting, while possibly leading to you missing crucial expenses and having to deal with legal ramifications.
Utilize Accounting Software
As an SMB, you’d be sensible to utilize advanced accounting software, which will enable you to become your own accountant!
Automated software will essentially do your books for you, where you can connect your business account and let the software take care of the rest. Modern software like QuickBooks can track expenses, send invoices, run reports and more, meaning you’ll never be overwhelmed with a mass of information.
Though it’s difficult to believe, there’s a considerable volume of free accounting software on the market, which can be used to satisfy the needs of many SMB owners.
Expect the Unexpected
Unexpected expenses can rear their ugly heads at any time, so rather than taking a reactive approach, you should focus on preventative measures. By building space into your budget for unexpected expenses, you’ll be ready and prepared to mitigate costs if they arise.
Always expect the unexpected, to avoid having to deal with undesirable consequences on the spot. Major expenses can drastically knock businesses off track, so remember to prepare for the incidence of these expenses in advance.
It’s literally a case of allowing room for unexpected expenses in your budget or being forced to take out emergency credit when the ‘unexpected’ occurs.
Establish Clear Payment Terms
It’s essential to establish clear payment terms from the offset, to coordinate your invoicing system to avoid facing cash deficits. Invoicing can involve a waiting period to receive your funds, but sending an invoice is just the beginning.
By implementing clear invoice terms your cash flow won’t be affected by late payments from customers. To avoid waiting for payments, discuss your payment terms prior to engaging with a payee, making your requirements clear and crystal.
You should establish:
- A payment due date
- Accepted forms of payment
- Late payment penalties
Always set reminders and follow-up on what you’re owed. That way, you’ll secure the money you’re entitled to.
Accounting is far from easy, but by leveraging advanced software, you can save money which you can reinvest in your business. You’ll be grateful to save money in the early stages of business, then you can consider working with an accountant as operations expand.