Managing the accounting for your small business effectively can be a challenge for even the most seasoned entrepreneur. When you wear many hats in your business, it’s hard to keep things straight and maintain clarity across your accounting processes.
So, what can you do in 2016 to make your small business accounting more efficient and effective? Here are five tips you can start implementing as soon as you celebrate the New Year:
1. It’s Time to Live Two Separate Lives
It’s one of the greatest challenges a small business owner faces: separating the world of work life from the world of personal life. Perhaps you’re making personal loans to the business. Chances are many personal trips are also business trips. And most likely, your personal and business expenses are intertwined.
Well, it’s time to break that bad habit by setting up a dedicated business bank account (if you don’t have one already), keeping your business credit card distinct from your personal one, separating expenses clearly.
2. Make the Accounting-Account Connection
It’s ironic that most small businesses use software to track their business accounting, and online access to their commercial bank account to do business banking — yet in may cases the two don’t talk.
Considering that bank reconciliation is one of the most essential but tedious and time-consuming bookkeeping tasks, fixing this gap should be a top priority. So, make 2016 the year that you connect your accounting software and your bank account electronically. If necessary, consider switching to cloud-based (online) accounting software to ease this process.
3. Turn Your Expenses Electronic
The next massive killer of efficiency and accuracy in small business accounting is management of expenses. So, once you’ve connected your bank account and your accounting system it’s time to set up an application for expenses.
Do you own a smartphone? If the answer is yes (and presumably, it is), then you can use your phone to snap pictures of receipts or track mileage, and tag them as expense records in any number of tracking apps. Then, connect your app to your accounting software and voila! You have achieved the trifecta of data integration: accounting system, bank account and expense manager.
4. Define Your Deposits and Deductions
Many small businesses also find themselves paying unnecessary taxes because they don’t accurately record deposits on a regular basis. By the same token, not knowing your legal deductions is equally as problematic. Focus on getting both of these processes in hand and you’ll be in great shape.
5. Lasso Your Labor Compliance
In small business, we have a lot of challenges when it comes to managing and building a workforce. To save money, many small businesses employ a large contingent of freelancers, part-timers and, in some cases, 1099 subcontractors. In each case, new court rulings and tighter labor law enforcement are finding many small businesses on the receiving end of audits and fines for violating labor regulations.
It may not be strictly an accounting issue, but labor compliance (including correct reporting, accurate classification of employees, precise timekeeping and more) are essential to keep your accounting accurate and your business on the right side of the law.
These five steps will help you really achieve a higher level of efficiency and effectiveness in management of your small business accounting. Make a New Year’s resolution today and see your business achieve greater success in 2016!