Having a good accounting system in place is a fundamental part of running a successful business. Accounting, they say, is the language of business. We think of it more like vitals. Knowing where your business stands financially is crucial for growth and longevity. It allows you to measure your profits, identify weaknesses, and measure whether or not you are on track to meet your financial goals. Having the right systems and processes in place can make a huge difference when it comes to your accounting; saving you time and money, allowing you to better manage your business.
As technology improves each day, there are new and improved ways to better handle your accounting, for example, expense tracking by simply snapping pictures of receipts, or using a cloud-based accounting program that gives you access to your financial records anywhere you go. Its improvements like these that can help you better manage your business.
#1 Keep Accurate Records
Part of managing your financial accounts is keeping track of all transactions, income, and expenses. Keep detailed records of clients, dates of transactions, vendors, and business expenses. This information is important to have on hand for tax purposes, and as insurance in the event of an IRS audit. In addition, expense tracking is necessary in order to qualify for tax deductions.
#2 Go Paperless
Going paperless with your accounting is not only a great option for reducing your carbon footprint, but it reduces clutter and allows you to stay better organized. You can utilize several receipt tracking apps to snap pictures of your receipts with your smartphone while you are out. Many of these apps will automatically categorize the expense for you, saving you time and keeping you organized. Then when you need to compile the information, for example, to close out your tax year, the information is readily available to you. No more overflowing filing cabinets or shoeboxes of receipts that you have to sift through.
#3 Create Business Accounts
One of the most important accounting tips is to create separate business accounts for your business, regardless of the size of your operation. This is the best way to keep track of your business expenses and profits and keep things more simple and straightforward.
#4 Never Commingle Monies – Keep Business and Personal Separate
This is why you need a separate business account, you don’t want to commingle business money expenses with personal money and expenses. This can create a lot of confusion, and lead to a lot of problems with balancing your books. Stay organized and prevent an accounting headache by using separate bank accounts and credit cards for your business.
#5 Stay On Top Of AR/AP
Accounts receivable and accounts payable are two very important aspects of your accounting. Do you regularly send out invoices to clients? These invoices need to be sent out on time, collected on time and followed upon. Failure to do so can result in a loss of income. A way to make this process easier is to utilize electronic payments and online invoicing. This makes the whole process easier for you and your client. In addition, it is important to always pay your bills on time. Paying bills late can result in late fees and affect your business reputation and credit score. To stay on top of accounts receivable/account payable dedicate a time slot to handle this.
#6 File The Correct Tax Forms On Time
As a business owner, there are certain responsibilities that must be done. FIling the correct tax forms on time is one of them. You may automatically be thinking about your tax return, and yes that is the big one, however, there are other forms you may need to submit as well, namely 1099’s. 1099’s must be submitted if you work with outside contractors who you pay more than $600. Since they are considered self-employed, the IRS wants to income reported to them. 1099s must be issued before January 31.
In addition, as a self-employed individual, you may be required to pay estimated taxes. Estimated taxes are due if you expect to owe more than $1,000 in taxes. Estimated taxes, also known as quarterly taxes, are due every quarter starting in April. The due dates for your quarterly taxes are as follows: April 15, June 15, Sept. 15, and Jan. 15. The amount owed can be calculated based on the previous year’s tax return. Simply take the total amount paid, and divide by 4. This will give an amount to pay for each quarter. It is important to stay on top of your estimated taxes to avoid unnecessary penalties. Having a good accounting process in place can help make the process easier.
#7 Use The Right Accounting Software
Having the right accounting software is a really important accounting tip that can make a huge difference. There are several good options when it comes to accounting software. A few of our favorites are Quickbooks and Xero. Both offer an impressive list of features, and since they are cloud-based, they are also available on mobile devices. This allows you to better manage your business while on the go, giving you access to invoicing, bill pay, expense tracking, and important financial information everywhere you go. So which accounting app is right for you?
- Quickbooks – Quickbooks boasts a strong reputation. They have been around for a long time and is probably the most well-known accounting software. Quickbooks offers several different memberships, varying in price from $10-$30 per month. Some things that make Quickbooks a great choice are: their invoices offer a lot of customizable features & built-in packing slips, their lending features, and their straightforward and easy to understand interface.
- Xero – While Xero hasn’t been around nearly as long as Quickbooks, they have gained some traction in recent years. One of their draws is their more sleek & modern interface, as well as their unprecedented security reputation, and they offer over 700 integrations. Xero is also affordable with plans ranging from $9-$60 per month.
A Few Bonus Tips
Some other accounting tips that can help you better manage your business include:
- Have a System in place:- Streamlining your accounting process is really important. It makes the whole process a lot easier, which in the end makes it more likely to get done. One of the biggest mistakes people make with their accounting is not making it a priority. Putting things off will only make matters worse and take longer in the long run.
- Know the Tax Laws In Your Area: – Another important accounting tip is to familiarize yourself with the various tax laws in your area. Tax laws vary from state to state, as well as city to city. Living in California but selling in 20 states? You may need to file in all of them, depending on new rules.
- Seek Expert Advice:- Lastly, don’t hesitate to seek the advice of a tax advisor, especially if you have a complicated situation or you get stuck. Sometimes, one of the best things you can do for your business is to know when to ask for help. This ensures that you get things done correctly and avoid any costly mistakes. It can also save you time, which in the long run, can help you better manage your business.
Proper accounting is important because it not only makes preparing and filing your taxes easier, but it can help you with budgeting and forecasting as well. In addition, it can also help you set and achieve both short term and long term goals for your business.
About The Author: After six years at consulting Fortune 500 companies with tax giant PwC, Miguel left management at the “Big Four” with one goal: to make taxes easier. Since starting Tax Hack, he has built a team fully focused on educating clients through seamless tax preparation and consulting experience.
Miguel is designated by the Internal Revenue Service to represents taxpayers in all matters before the IRS and in the United States Tax Court. He has been featured in the Wall Street Journal, Fox Business, and MSNBC on tax and has testified before the U.S. Congress on tax reform as an expert witness. When not working with his VIP clients, Miguel coaches his son and daughter’s AYSO soccer teams.
Feature Image by Steve Buissinne from Pixabay.com