5 Accounting Tips for Mom and Pop Businesses to Take Control of their Finances.
Managing the finances of any business can be challenging and time-consuming. Still, the stakes for small and medium-sized enterprises (SMEs) like mom-and-pop businesses can be even higher. As a small business owner, you must have an accurate and up-to-date understanding of your finances to make informed decisions that can impact your bottom line.
To help you stay in control of your finances, we’ve put together these top five accounting tips explicitly tailored to mom-and-pop businesses.
Keep your personal and business finances separate.
Mixing personal and business finances is a common mistake many small business owners make. Keeping separate bank accounts for your personal and business finances is crucial in managing your finances effectively. Keeping your business finances separate makes it easier for you to track your expenses, manage your taxes, and reconcile your bank statements. Additionally, if you choose to incorporate your business, keeping a separate account is essential for formalizing your business’s entity and obtaining liability protection.
Use accounting software
Gone are the days of having to keep track of your finances on spreadsheets or – worse still – paper ledgers. Plenty of powerful, easy-to-use accounting software options available for small business owners can make managing your finances straightforward and hassle-free. Quickbooks and FreshBooks are just two popular examples that can automate a wide range of accounting tasks, such as invoicing, expense tracking, and bank reconciliation. Such software also allows for more accurate financial tracking and forecasting, which helps you make informed decisions based on accurate, up-to-date financial data.
Keep track of your receipts.
It’s essential to keep track of your business expenses so you can claim them as deductions when tax season rolls around. One easy way to stay organized is to keep all your receipts in one place, making their records handy and saving time when preparing tax documents. If you’re a retail business, opting for a POS system that automatically collects receipts for the customer’s purchases would be best. On the other hand, scanning hard receipts and keeping digital records for service-based companies could help ensure receipts’ safety and easy access.
Understand your tax obligations.
While tax can be complex, it’s essential to understand your tax obligations as a mom-and-pop business owner. Ensure you do proper research and become informed about the tax returns you must file, deadlines, allowable deductions, and how to efficiently tax plan. Failing to understand tax requirements can lead to missed deadlines, increasing penalties, and processing times. Accounting software can help you calculate, prepare and file your returns without difficulty, ensuring you have time to focus on your business.
Hire an accountant or bookkeeper.
Hiring an accountant or bookkeeper to manage your finances is a wise and worthwhile investment. A professional accountant can do much more than track your financial records and prepare your taxes. They can offer sound financial advice, explain complicated financial reports like profit and loss statements, balance sheets, and cash flow statements, and identify financial areas that need improvement to grow the business. They can also give revenue, taxation, costs, and expense management insights.
If you don’t need full-time accounting help, consider hiring a bookkeeper. A bookkeeper will keep your books in shipshape daily, weekly, or monthly, ensuring your accountant has accurate data, up-to-date records, and streamlined financial reporting.
In conclusion, mom-and-pop business owners have the responsibility of fulfilling a wide array of roles ranging from HR, marketing, accounting, and customer service to operations. To make successful business decisions, it’s crucial to have a real-time understanding of the business’s finances. You can take the above tips as essential guidelines to achieve accurate, up-to-date data, reducing stress and time consumption by automating some accounting functions with reliable accounting software. Working with an accountant or bookkeeper is also important to get expert financial advice tailored to your specific business.
By taking these steps, you’ll be in a better position to keep your business thriving now and in the future. If you need help getting your business organized, contact our team of experts today.