Having your books in order is an essential part of being a small business owner. If you can't properly balance your accounts, you could end up making losses, failing to pay the right amount of tax or not realize that certain aspects of your business are holding you back. All this could cripple, or even prematurely end, your dreams of running a successful business.
To ensure that the dreams you have for your business remain on track, it's important to adopt certain accounting practices. These practices will ensure you don't fall foul of the IRS or fail to make timely decisions with regards to your business.
Don't Mix Personal and Business Expenses
It can be difficult to keep track of what you bought for yourself and what was for the business. This is why you should keep track of any and all expenses. This will make life a lot easier for you when tax season comes around. Claiming personal expenses as business ones can lead to serious penalties.
Keep Track of All Transactions
You should have records that indicate any transaction that takes place within your business or with regards to it. Whether it's a customer putting in an order, collecting an item, making a deposit or paying a temporary employee, every single record is important. Keeping track of transactions enables you to:
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Know how well your business is doing
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Keep track of your money
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Identify loopholes in terms of security or efficiency
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File accurate tax returns
Follow Up On Invoices
Sending an invoice doesn't mean that money has been sent to your account. Ensure that you follow up on all invoices so you know which vendors still owe you money. This will enable you to take action much faster.
Keep Thorough Inventory Records
Poor inventory management is a key reason why some businesses have failed. If your inventory is poorly managed, some of the items could be stolen or misplaced. This can lead to unnecessary losses or even unfulfilled client orders. Keep track of all your inventory and related data such as dates of purchase and purchase prices.
Hire a Professional
Managing your books becomes a lot harder as your business grows. The number of transactions increases and so does the size of your inventory. Keep track of all this while running the business is not easy. Consider bringing in a professional CPA, such as those at Emerald Financial Partners, at some point to help ensure your accounting is in order.
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