By REDC Accountant Karla Dillon
Managing the finances of your new businesses is a critical cornerstone to ensuring your business is built to last. We have compiled our top advice for best practices when it comes to accounting for your new and small business.
Keep your business and personal finances separate.
Open a new bank account, just for business revenue and expenses.
If you need funds for personal expenses, transfer funds to your personal account.
Choose an accounting software that fits your budget and needs and use it.
Accounting software can track invoices, pay bills and reconcile accounts. This is a huge time saver!
Online platforms (such as QuickBooks Online) allow you to access your info from anywhere.
Price varies widely and there are even some free options available.
Balance the books monthly.
It is easy to put off paperwork until “later” but staying on top of your accounting records saves a lot of time and frustration at the end of the quarter/year.
Having your records up to date allows you to get a clear picture of your business’s financial status at any point in time.
Keep your business accounting documents.
Organization is important, and allows you to easily track any questions that may come up.
Documents serve as proof if you are ever audited by the IRS or another entity.
The general recommendation is a minimum of 5 years, and frequently 7 years.
Documents you should retain include invoices, receipts, and payroll records.
Utilize an organized filing system, either via paper or electronically.
Utilize financial reports.
Most accounting software platforms can prepare essential reports such as balance sheet, profit and loss (income) statement and statement of cash flows.
Financial reports help you keep track of your company’s financial health and can help you make decisions on growth.
Keep track of cash payments.
If your business receives cash payments, they should be deposited into your business bank account, prior to spending.
Depositing the funds and recording them into your accounting software will prevent you from forgetting which customer paid or what they purchased.
Keep up with invoicing.
Send invoices to customers as soon as the job is complete, or at the very latest, the end of that month.
Delays in invoicing can appear as being unorganized to your customer.
Immediate invoicing via your accounting software allows you to track accounts receivable and stay on top of payments due to you.
Pay your employees on time.
Employees rely on timely payments so they can pay their bills.
Be sure to set aside funds for payroll taxes.
Be sure to pay payroll taxes on time as well.
Ask for help.
If keeping track of all your financial transactions proves to be too much, consider hiring an experienced bookkeeper. You can outsource as much or as little as you want done.
Common bookkeeping tasks include:
Entering transactions into the general ledger
Completing bank and other account reconciliations
Preparing monthly financial reports
A good bookkeeper can also offer advice on appropriate software, help you prepare an annual budget, and understand your financial reports