Make business accounting a breeze with these practical tips
Your business idea might be your passion, but if you can’t manage your accounts you will struggle to build a successful business. While accounting and bookkeeping can seem like a daunting task, taking a clear and methodical approach can ease the burden. Here are our top 10 tips to ensure hassle-free accounting.
As the saying goes, a business budget is telling your money where to go instead of wondering where it went. Planning ahead is key – a budget should look at least a year ahead. To do this, understand your true business costs, by examining your biggest expenses such as costs of goods, rent, equipment, wages, vehicles and utilities. But don’t forget to factor in your lifestyle and make sure your business will generate enough profit to sustain the life you want outside of work.
Once your business is legally registered, you can open a business-only bank account. You will generally need an ABN. Mixing personal and business expenses can make things confusing, so its best to separate and coordinate your accounts so you can establish and maintain a clear financial picture.
Record-keeping on every front is a must for operating a successful business. It allows you to monitor business growth, create accurate financial statements, and manage deductible expenses. All of this is crucial when it comes time to prepare your tax returns.
Establish an organisational system for receipts and invoices from the outset. You can use a spreadsheet, a notebook, or software. As long as it’s organised and easy to understand.
You need to track both variable and fixed expenses. A variable expense fluctuates weekly or monthly, whether it’s advertising costs, billable labour, or materials. A fixed expense is static and includes insurance, rent/mortgage, and loan repayments.
Tracking all of your expenses correctly and consistently gives you a clear picture of where every cent is going and a big picture of what you can spend.
Big businesses produce profit and loss statements as a standard step, but so should small business owners. You can get a clear picture of your financial health by using a monthly P&L.
A P&L details all the revenue your business has brought in, the expenses you’re incurring, and shows you where all your profit and losses are. The benefit of this is also cumulative, as you can look back on previous P&Ls to look for trends that will allow you to make more informed decisions about resources.
You can create your own P&L, or you can enlist the services of a small business accountant.
You need a tracking system for sales and/or inventory. If you need help creating a system that works and is easy to track, a small business accountant can help. You need to easily see what you’ve sold, what’s in stock, what’s doing well, and what’s struggling. It isn’t just important for ordering new stock; it’s key to knowing what not to order.
If your business doesn’t revolve around inventory, but you sell services, you should be tracking sales. Over time, you get a better sense of slow months and can find patterns to explain that and inform your advertising approach. In the long run, a tracking system will save you time and money.
Profit margins are a major part of building a successful business, and it’s something people often get wrong. The margins in the hospitality industry will vary widely to construction or retail.
You need to know the industry average and look at your overhead costs and what it takes to generate a profit. You have a clear outline of your outgoings. What do you need to break even after you pay all the bills and for labour? What will it take to make a profit?
You can look at what your competition charges for similar services and products and research to price yourself competitively. Make sure that you’re adjusting your prices as costs evolve.
You need to invest in training. Plenty of courses are available online that can teach you the basics of accounting and bookkeeping. You don’t have to be a star pupil to make it work, and even if you plan to enlist the services of an accountant, basic knowledge will serve your business well.
You should factor in taxes as a monthly fixed expense that goes directly into a savings account so you can easily pay your tax bill when the time comes. Your accountant can help you determine your obligations so you know you have it covered.
With plenty on your plate, you need as much help as possible to balance your day-to-day and bottom line. Bookkeeping software can save you time and money and prevent you from having many sleepless nights.
With bookkeeping software, you get a user-friendly, secure dashboard to track your financial performance. Scalability is key; you want software that can grow with your business. A small business accountant can provide financial advice, tax planning assistance, and more. Ideally, you can invest in both to truly maximise the financial success of your business.
Don’t be afraid to review your setup as your business evolves. A spreadsheet might work for the first few months, but as your business grows, you must consider advanced options to keep track of your financials. Getting your accounting solutions right gives you more time to spend on what will bring money through the door.
Operating a business of any size can be overwhelming, but with the handy tips above, you have the blueprint to keep your financials in check. Knowing accounting basics gives you a platform to make sound decisions for your business moving forward. These tips will keep you on top of your numbers, but a small business accountant can help you take your financial health to the next level.
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