Four essential accounting tips every accountant should share with new small business owners
For many small business owners, managing the finances correctly, even though it’s a crucial part of running a successful business, is all too often rather low down on the list of priorities. At the end of the day, it’s probably best to let a professional take care of all accounting matters, but when things are first starting out, it’s likely that the business owner will be the one in charge.
That’s why it’s vital that as the professional, you advise on the basics so that at least they gain a basic understanding right from the start. This will help them to avoid some of the pitfalls that too many small businesses fall victim to during their first few years. Here’s four essential accounting tips we believe are the ones to pass along – your clients will thank you down the line.
Track daily expenses from day one
It’s really easy to get caught up in the daily occurrences of a small business, so much so, that money just seems to be flying out of the bank, yet it’s not necessarily being recorded. It helps to advise your client to be strict from the start, keeping an accurate record of everyday expenses. At the end of every week, they can then do a quick over-view and check to see if they’re on top of things. What’s more, being familiar with their daily/weekly expenses will come in very handy when it comes to having to budget in the weeks and months to come.
Invoice early and often
All too often, business owners allow the urgent things to take over what’s important, and by urgent we simply mean the daily operations. Invoicing and collecting what’s owed by customers is what is really important and the reason for this is simple: cash is king. Without money coming into the business, it can’t possibly survive, let along prosper. The key is for owners to ensure that invoices are sent out early and often – this is to help prevent cash flow issues from occurring. However, there is of course a difference between issuing and receiving. Follow ups need to happen regularly on all invoices and if need be, some can even be re-issued. If businesses make their payment terms clear and then make every effort to enforce them, they’ll start to find that more people will pay on time and without having to be given a nudge.
Set up a payroll system
When it comes to paying employees’ salaries, it can really help to use a reliable payroll system. In the beginning, small businesses are likely to have only a handful of employees, but as the business grows, so more and more people will start to come on board. The last thing an owner wants is for things to become too complicated with regards to the payment of wages, as this can negatively affect employees. Reputable payroll software can make all the difference and it will take the pressure off at the end of the each month - something that will make both owner and staff happy.
Re-evaluate methods every so often
Things evolve as a business expands and develops, and that means constantly having to reassess methods, processes and approaches. When a business first launches, chances are that simple methods will be used, which in the beginning, is perfectly acceptable and really smart. Yet as the business grows, slightly more advanced approaches will be required to keep up with the developments naturally taking place - what once worked may not any longer, and time and money may be better spent in other areas. Re-evaluation is a necessity when it comes to accounting and a business’s finances, so it’s best to be prepared for this and on the ball. This is something that business owners can really benefit from knowing and implementing.
It’s not in a small business owner’s best interest to just “wing it” when it comes to finances – this is something that holds true always, but even more so in the early stages of business. Some just put in minimal effort and hope for the best, but this is bound to be a recipe for disaster. As someone in the know, it can very useful for you to give first-time business owners the basic tools and understanding they need to get on top of their finances – that is, of course, before you step in after they finally decide that it’s really best to leave it to the professionals.
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