5 Proven Finance and Accounting Tips for Small Businesses

It is never easy to start and sustain a small business and it is all but impossible to run a business without proper access to financing and working capital. In the management of any small business, finance and accounting play an existential role. Every business operates on money and without control over money there is no control over the business. Access to cash and credit is extremely necessary for small businesses to build inventories, fund operations, and bridge the gap between billing and payments.

Most small businesses fail due to cash flow problems and research has shown that more small businesses fail in a given year than are being started. Moreover, it can be quite overwhelming for small business owners to deal with finances, and employing organizational techniques and technology can be greatly helpful.

The key to financial discipline for small businesses is to realistically balance needs versus wants. Small businesses must plan and persevere to ensure that their records are complete and as accurate as possible. With the income and expenses of the small business properly accounted for, the flow of money can be managed and thereby direct the course of the business.

Finance and accounting are some of those back-office tasks that are not given much importance by small business owners but still take up a lot of the business time and make running a business much harder. Good accounting practices have the advantage of keeping the small business in compliance with the law as without good accounting the business may end up paying the wrong amount of taxes.

Here are a few finance and accounting tips to meet business challenges

1. Keep Accurate Records

It is essential for small businesses to have a proper record-keeping system in place. It is critical that the accounts are up to date and accurate so that true and fair annual accounts can be drawn up. Much of the small business' day-to-day accounting can be tracked and handled via online banking services but it is better to have all the financial records in one place for the sake of simplicity.

Careful record keeping can also help small businesses with tax returns and also in the prevention of theft and fraud. It also helps small businesses in tracking expenses, creditors and debts, apply for funding, save accountancy costs, and pay accurate tax on time and is one of the most important finances and accounting tips.

2. Have a Modern Accounting System in Place

Small businesses must adopt a sound accounting system that can help them to produce updated and accurate financial information. Its importance is such that, its failure can lead to malfunctions in other systems. Effective and efficient filling and documentation systems are also included in such systems. The persons that are usually involved in preparing financial information are also highly qualified.

The financial statements that are drawn are usually based on outlined accounting standards and concepts. Accounting apps can also be used as they seamlessly integrate into various services for efficient and easier use. Accounting systems not only make everyday work easier to perform, but they also record accounting activities in the background when documents are being prepared. The amount of time an accounting system can save for a business enterprise is too significant to ignore.

3. Carry out Accurate Invoicing

Having an efficient and accurate invoicing system is critical for small businesses as they can ensure that they are getting paid for the work they have done or the products or services they have sold. Invoices also contain specific customer information, have to be processed and delivered swiftly, and require the highest standards of accuracy.

Invoices are more than just prompts for the customers to make payments, they are physical records of terms of a transaction and therefore, it is critical that information that is entered is accurate and complete. Adding additional info to an invoice, canceling an erroneous invoice, or creating multiple versions will only hamper the accounting and accounts receivable process. By reviewing the invoices, the expenses of doing business can be controlled.

4. Practice Generally Accepted Accounting Principles (GAAP)

GAAP is centered on certain principles that dictate to the accountants the items that have to be recognized in the financial statements, how the amounts and items must be displayed, which amounts have to be reported, and what disclosures will be beneficial to the readers of the financial statements. GAAP instills a sense of trust among the people and stakeholders that the true performance of the small business is being shown to them.

Complex financial numbers are broken down and it even allows verification and audits to be conducted on a small business's accounts. GAAP makes it easy for donors, lenders, and other stakeholders to clearly understand financial statements based on which small businesses can seek loans from banks or other avenues. Lenders know that these numbers signify the true worth of the business and there are no concerns while issuing loans. The adoption of GAAP principles can drive accounting management in a new direction.

5. Hire a Professional to Handle Taxes

It is critical for small businesses to hire the right tax professional which can save a lot of money for the business. The tax professional must have specific experience and knowledge in helping small businesses and it is even better if the person already has good knowledge about the type of small business or industry. Small business owners tend to do their taxes themselves and try to save some money. But not hiring a tax professional can cost the small business a lot down the road.

Not all deductions may be claimed even though the small business is qualified for it or they may underpay the tax bill resulting in penalties and other fees. Tax professionals keep themselves updated on the ever-changing tax laws and even help small businesses to plan ahead for potential tax hikes. It is advisable to build a strong relationship with the tax professional so that they can be called at any time year-round and these were a few of the finance and accounting tips

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Conclusion

It takes discipline and desire along with the right systems and controls to manage the finances of a small business. Access to the right tools and resources and leveraging technological advances can drastically narrow the financing and accounting gap for small businesses. If a small business does not have a fully staffed financial department, it can rely on a professional finance and accounting outsourcing service provider to gain a competitive edge in the market.