Top 8 Business Accounting Tips for SMEs
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To run a successful business, no matter how big or small, up to date and accurate accounts are essential.
Accounting for SMEs can often be seen as distracting from the prime objective of building the business, but it must not be overlooked. Accurate accounts are essential for tax returns, sales tax calculations, profit and loss and generally keeping the business going in the right direction.
So in this short article, we give you some top tips for keeping your business accounts in line.
Open a Penta Business Account today and get your accounts under control.
Put Time Aside for Your Accounts
I have put this tip first because it is one of the most overlooked, and definitely something I’ve been guilty of not doing!
It’s understandable. Business owners are busy, and what they want to be doing is making money. All too often, doing the accounts gets put to the end of the week, and then you forget about it or just ignore it. Several months later, and you still haven’t done your accounts. Now, instead of fifteen minutes a day, it’s going to take you the best part of a whole day to sort out.
Make regular time slots for accounting and stick to it!
Don’t Mix Personal and Business Accounting
The first accounting priority for any small business is to separate personal and business finances. It’s so very easy to use your personal funds in the early stages of building the business. But when it comes to sorting your accounts and submitting tax declarations, it can get very complicated.
If you need to fund the business from your own money, then transfer the money to your business account as an owner investment.
Track Your Income
Keeping track of your income is vitally important and categorizing it helps identify where you are making the biggest profit.
When it comes to submitting your tax return, it’s essential that you do not miss something out. The fines for under-declaring your income can be substantial and will outweigh any savings made on the tax you pay.
Categorize Every Business Expense
Expense tracking will help reduce your tax liability in the future, so it’s important to get it right. The simplest method is to use a debit or credit card linked to your business account. The next step is to link your business account to your accounting software.
The Penta Business Account offers automated accounting features, tracking the business income and expenses directly to your accounts software. This not only saves you time but also minimizes the risk of losing your receipts and being unable to claim the expense.
Plan for Large Expenses
Depending on your business, there may be large startup costs. Computer equipment, stock, and consumables can quickly add up. Plus, as your business grows, you’ll need to replace equipment, find larger offices, and more.
These expenditures need to be planned for and money found to implement them. Having your finances in order is the only way you will know if the expenditure is affordable.
Chase Outstanding Invoices
Cash flow is the lifeblood of any business. Many very successful businesses have failed simply because they did not get paid. The order books were full, and the products were flying out the door. But unless your customers pay, the business is going to be in trouble.
Make sure invoices are sent promptly after a job is finished or an order is dispatched. Follow up with friendly reminders as the payment date approaches. You could offer a discount for early settlement.
Accepting online payments and credit card payments is another way of speeding up invoice settlement. It may cost you a small percentage in handling fees, but it is cheaper than the alternative.
Automate as Much as Possible
The more you can automate your accounting, the easier it will be. Invest in an accounting software package, link it to your bank account, and a great deal of your accounting will be recorded automatically.
Accounts software packages will categorize your income and expenditure automatically, ready for your tax return. More advanced options can track your sales tax and generate reports for the tax submissions.
Seek Professional Advice
Accounting and tax returns can not only be complicated but also time-consuming. When you first start in business, hiring a professional may not seem worth the extra cost. But after a long day’s work, the last thing you want to do is your accounts. Believe us, we’ve been there!
As your business grows, the accounting demands grow with it. Plus, of course, a professional can help you take advantage of available tax deductions.
More importantly, a bookkeeper or accountant can advise you when tax returns are due and help you avoid expensive fines for late submission and payment.
Doing your accounts is one of those jobs that most business owners hate. The problem is, you can’t get around it. Very soon, things will start to go wrong, the tax return will be due, and not doing your accounts will become very expensive.
From the day you decide to open a business, start your accounting. Make it a routine that you always do, and it no longer becomes a chore but a five-minute job. When it takes more than a few minutes a day, it’s probably time to look for professional help.
Features such as automated accounting and expense management come as part of opening a Penta Business Account.