Part of success is understanding what failure looks like. According to U.S Bureau of Labor Statistics, 20% of small businesses fail within the first year. By the end of their fifth year, roughly 50% of small businesses fail. After 10 years, the survival rate drops to approximately 35%. This is a very sobering statistic, especially during the time of COVID-19 and its future.
Chances are, if you are already reading this, you’re one of the SMB’s that make it. Why? Because you are already thinking about what it takes to maintain a healthy small business. And maintaining a healthy small business requires proactive bookkeeping practices. These best practices can implement sustainable growth and success in your business.
Use Cloud-Based Accounting Tools
One of the most common bookkeeping tips is that you should be using cloud-based accounting tools. Cloud-based accounting tools has fast become the go-to option for SMBs. Intuit Quickbooks owns 80% of the market share for small businesses on a cloud-based software in the U.S, approximately 29 million users.
Here is why cloud-based accounting is advantageous to SMBs:
Accessibility: You can log in anywhere, anytime, from any device. All you need is the internet.
Cost-effectiveness: Cloud accounting expenses come in small, monthly payments, which are manageable for small businesses. Cloud accounting also negates the need for company servers and the overhead that comes with it.
Security: Cloud accounting tools are uniformly secure and not vulnerable to data loss through human mismanagement.
Scalability: One of the most exciting benefits of cloud-based accounting tools is their scalability. As your business grows, so does your financial needs. There is no need to migrate to larger systems.
Separate Business and Personal Expenses
You may have heard this one before, but one of the most important bookkeeping tips is that you must separate the business expenses and your personal expenses. The best way to do this is to separate your business and personal bank accounts and only use them for their respective expenses. Avoid paying business expenses on your personal account and vice versa. If you do not, this will result in a pile of receipts that you will need to manage for your business bookkeeping.
Come bookkeeping time, you will easily be able to track the input of your business expenses. Whether you choose to invest in a capital expenditure or withdrawal profits from the business, your bookkeeper will be able to accurately manage them in a timely manner.
Close Your Books Monthly
To keep things running smoothly, a best practice is to close your books every month. This will allow you to analyze performance over the month and help you to plan for the next month. It will also ensure your books are 100% up to date.
Reconciling your bank account promptly after close is another small business accounting habit that should be implemented. As soon as you receive your statement, you can go in and make sure the balance reflected is the same as your bank account. By closing monthly, you will avoid hours of tedious work troubleshooting errors in your entries.
Track Income and Expenses Accurately
To save time and hassle, make sure that your expenses and income are recorded accurately. If these figures are off, you will not be able to generate accurate reports and could even get in trouble come tax time. This can also increase your chances of maintaining a healthy cash flow.
Get a Professional on Your Side
There are many reasons why small business needs to work with an accounting professional. As the owner of an SMB, you are most likely focused on growth and innovation for your business. Not on forms, changing tax laws, and red tape. Therefore, you need to get an accounting professional on your side. One that can advise you, save you time, meet deadlines, maximize your deductions, handle audits, and ensure that you are always 100% compliant.
Outsource for Efficiency
What’s even better than getting a professional on your side? Getting a team of professionals on your side! Outsourcing your books means that they will be managed by a team, including a bookkeeper, tax pro and a CPA. A bookkeeper can help you grow your business, but outsourcing can make this happen even faster.
With outsourcing, you are freed up to focus on your business’s growth, while at the same time you will receive accurate and timely financial reports to guide you in your decisions. You also won’t have to lose any sleep over tax season, payroll or compliance issues.
According to research done by Deloitte, outsourcing has the power to make businesses more agile, effective, and efficient. So, if you want this for your business – and hate bookkeeping – take the opportunity to outsource.
Bookkeeping is generally one of the facets of running a business owners enjoy the least. But, it is also one of the most important areas to maintain and keep on top of. Fortunately, you now know the best bookkeeping practices needed to keep your books hassle-free and up to date. If you are looking to hand the whole thing over to a team of pros that will grow your business, well... you came to the right place. Contact us today and check out our services to see how we can provide Solutions that work for your SMB.