Starting a business from scratch and then building it up is a hugely rewarding experience, but it certainly is not easy.
Entrepreneurs pile hours of work and commitment into their businesses, and nowhere is that more apparent than in the area of accounting. Keeping your books up to date is difficult but essential. Here are some tips to make the process a little easier.
#1 Keep personal, and business expenses separate
Perhaps the most important tip of all, this point even has legal ramifications. At the very least, mingling personal and business expenses is extremely confusing.
At worst, it can land you in legal difficulties, especially with tax. The easiest way to maintain a differentiation is to open a business account. These accounts are required by law in most cases since you’re technically not allowed to push business payments through personal accounts.
Even without this legal imperative, operating a business account just makes your bookkeeping much more straightforward. They are also psychologically useful and help you separate yourself and the business into two different entities.
#2 Make a budget
Often easier than it sounds, most small businesses formulate some kind of budget but quickly find that they can’t stick to it and then subsequently abandon the whole idea.
Budgets don’t just help to keep your spending under control. They determine the shape of the business each quarter and help you to understand whether you’re investing too much or too little. A well-formulated budget should be realistic enough to stick to while leaving ample room for investment.
#3 Keep books up to date
bring all your books up to date. Keeping regular records is time-consuming day to day, but it saves you a great deal of effort at year-end.
Hiring third-party accountants are usually the best way to get this process right. Using Using Plummer Parsons full-service business accountants in Brighton makes keeping up-to-date records substantially easier.
Not only will they comb through your accounts looking for any inconsistencies, but professional accountants will also ensure that you comply with tax regulations. That is essential for any business and makes an accountant virtually indispensable.
#4 Make payroll more efficient
Payroll is one of the most dreaded parts of any business calendar, but it does not need to be. There are plenty of ways to make payroll more efficient. These range from using fully automated (but often costly) payroll software to streamlining the process yourself.
The latter option is usually the best for budget-conscious small businesses, and there are lots of steps that you can take. Keep policies simple, enable the submission of electronic payslips and use direct debits. Ensure that employees know what they have to submit (and when) by making a detailed payroll calendar.
#5 Flag high-cost expenses
High-cost expenses come in all shapes and sizes, and they might even be one-off payments. Hiring transport for a specific occasion, kitting out a new office, or purchasing a new piece of business software, for example, would all fall under this bracket.
If not recorded, big expenses can quickly spiral out of control. Monitoring your largest outgoings also gives you a better understanding of where you might be able to cut costs in the future.
#6 Leave money for investment
Too many small businesses overlook this crucial area of accounting. No matter how tight your budget is, always leave some capital aside for investing in growth. Using money to grow is an existential part of any business, no matter its size.
Building a surplus isn’t easy, but it is accomplished via careful bookkeeping and cutting down on large expenses. Watch out for recurring payments and subscriptions, too.
These might be for something as simple as energy tariffs or ongoing payments for access to software and cloud storage. Recurring payments can usually be cut down through negotiation or simply by switching to another provider.
#7 Use accounts to gauge performance
Although it isn’t always a completely straightforward relationship, your financial position is nonetheless an excellent way to gauge your business’s overall performance.
Since accounting is an ongoing process, you can trace your growth year on year and even make predictions about your future trajectory. This helps to inform decisions and will also flag up any areas of concern. Disruptions within the business or market will usually manifest themselves in accounts first, so keeping watch allows you to take prompt action.