Accounting and bookkeeping are absolute necessities in any business. When you’re in startup mode, you’ve obviously got so much to deal with that managing the books often seems superfluous. But really, nothing could be further from the truth. No matter what your business is or how big it is, if you don’t follow accounting and bookkeeping best practices, you’re setting yourself up for a financial disaster, and putting your cherished businesses, that you’ve put so much of your time, money, and life energy into, at serious risk.
When you get right down to it, the accounting and bookkeeping principles you need to follow for a small business aren’t that much different from those that apply to huge multi-national corporations. Intelligent record-keeping and financial analysis are crucial to understanding where your money is going, and help you plan properly for further growth. You also need to be certain that you stay on top of your obligations: to your employees, to your vendors, and of course to the government, which doesn’t generally have too much of a sense of humor about missing tax payments.
Since you don’t want to end up with a financial disaster that could sink your business, here are a few points to keep in mind regarding your accounting and bookkeeping:
Keep your business and personal finances separate
It may not seem important, especially if you started up as a “one man (or woman) shop”. In the early days, you probably paid for a lot of expenses out of your own pocket, and used cash receipts from the business to pay your personal expenses and bills. But that’s not the optimal way to manage things. Don’t forget that anything you spend on your business, ranging from the smallest expenses like a box of paper clips to major expenses like office rent, are deductible from your income when the time comes to file your tax returns. The more you can deduct, the less you have to pay Uncle Sam. Invest in bookkeeping software, or, if your business is getting more complex, consider hiring a bookkeeper.
It’s not too early to start doing it right
If you think your business is too young or too small for you to have to worry about proper accounting and bookkeeping methods, you’re making a mistake, and may be asking for trouble. While you may not yet have a need for sophisticated financial statements and analysis, you will at some point. And if you haven’t been recording all of your income and expenses all along, you’re going to have a potential accounting nightmare that’s going to be difficult to sort out.
Consider outsourcing your accounting and bookkeeping
If you believe me, and understand that you can’t afford to overlook these vital functions, but you don’t feel you spare the time to work on those, consider outsourcing the work to a virtual accountant. You’ll be putting your finances in the hands of experts for whom this is their specialty, often at a fraction of the price of hiring a bookkeeper to come in to your office. The savings will be money that you can put back into your business, and also frees up your time for more valuable uses toward the growth of the company.