Many entrepreneurs do not give much thought to the accounting aspects of their businesses. Unlike the more exciting areas of the business such as product launches and marketing campaigns, getting your finances in order can be a tedious process. However, this is one of the most important tasks business owners must fulfill. Being on top of your finances not only helps you manage critical factors such as cash flow but it can save you thousands of dollars in the long run. It also means that you can fix any financial problems in time. For example, if you realize that you have negative working capital, you have enough time to apply for a working capital loan before 2021.
Here are some tips on how you can get your business finances in order before the end of 2020.
Separate Personal and Business Expenses
This is a common problem that affects small scale businesses. The desire to use business resources (such as a business credit card) for personal expenses can be very tempting. Most business owners will tell themselves that they will eventually pay the company back anyway. Entangling personal expenditures from legitimate business expenses becomes a major problem. Not only does this end up costing you precious time but you may even miss out on tax-deductible benefits.
Hire a Professional Accountant
Some businesses, especially small-scale ones, prefer to use a DIY approach when it comes to organizing their finances. While this may appear to work, the reality is that these businesses could be saving much more money if they had a professional accountant manage their books. Accountants are not only financial experts but they also have a good understanding of tax laws. This means that they can find tax deductions in all sorts of areas in your business. The net result is that you save more money than the initial professional fees paid to accountants.
Such professionals are also able to straighten your accounts and put in place systems that make organizing your finances in the future easier. Having proper financial systems helps when you approach financial institutions for business loans.
Schedule Time for Accounting
One of the common practices among small business owners is to treat their accounting function as an afterthought. Such business owners will only look through their accounts when the taxes are due, or if there is a problem such as a wrong invoice amount and so on. The problem with this approach is two-fold. One is that accounting problems tend to be progressive and delays in catching a problem only make it harder to fix it when it’s finally detected. Secondly, not periodically reviewing your accounts can increase the risk of embezzlement or encountering unscrupulous suppliers.
By scheduling time to review and organize your accounts, you also make it easier on yourself when the time to pay taxes comes.
By organizing your finances now, you will be able to move into 2021 with a more streamlined business model. Not only does this save you money but it gives you peace of mind while focusing on your company’s core business.