Last Updated on July 27, 2022 by rabiamuzaffar
Struggling with keeping track of your finances and organizing them?
While most states are gradually eliminating restrictions, the struggle of business owners continues. Only 26% of the surviving small businesses in the U.S have readily available cash.
However, many can only last for at least 3 months. This means that many business owners are likely dipping into their savings to make up for their losses.
So, if you’re looking for ways to keep your business alive, then you’re in the right place! Here are seven accounting tips that you can use to minimize your losses and survive these trying times.
1. Create a Budget Plan
Budget plans contain the projected cost for every input that you need for your business. This serves as your guide when you make purchases and other business plans.
Without it, there is a high chance that you’ll be spending money too much on unnecessary investments. As a result, you’ll likely fail to maximize your capital fund and end up getting extra loans.
As such, research the average cost of running your business and create a spreadsheet. It’s also best to estimate how much you’ll need to allocate for each item.
Include adjustments on your estimations to cover up for unexpected events such as price hikes. At the same time, review your plan and determine certain expenses that you can cut down.
As you continue managing a business, make it a habit to update your budget plan every few months. If you have the time, roam around and find new suppliers that can help you save money. This will help you cut down unnecessary expenses and minimize your loss.
2. Separate Personal Expenses From Business Expenses
Using one account for both business and personal funds is not advisable. This often leads owners to unknowingly using business funds to cover personal expenses. As a result, they’ll run out of money, which leads to debts and even bankruptcy.
When running a business, make sure to establish a definite financial structure. You should also open a savings account where you’ll keep your monthly business revenue.
Use a business credit card account to pay expenses that are too high to pay in cash. On the other hand, merchant services account can help hasten credit and debit transactions from customers.
3. Practice Bookkeeping
Small business owners must understand where their fun is going and where their income is coming from. Bookkeeping is a critical tool that can help business owners in this aspect. It is the systematized process of recording and tracking your expenses and income.
With an accurate and updated financial statement, you can analyze your business’ financial health. Bookkeeping will help you decide on certain business decisions. This includes determining which aspect you need to remove to increase profit.
It can also help prove your legibility when you encounter difficulties with the IRS. With clear-cut financial books, you’ll be able to answer any questions they have on your income, tax deductions, and more.
Furthermore, small businesses often delegate all accounting functions to one person. This can make it easy for personnel to commit accounting fraud. Reduce the risk of accounting fraud by segregating accounting duties to different personnel.
4. Consider Automating Bookkeeping Process
The downside of bookkeeping is that it takes a lot of time and is prone to error when done manually. Thankfully, there are various available accounting software that small businesses can use.
The beauty of using such apps and software is that you get to eliminate this tedious workload. Many accounting tools can enter thousands of ledger data within seconds.
This allows you to focus your time on more important matters. Aside from increasing productivity, the software also promises accurate data.
5. Watch Out For High Business Expenses
As you go over your financial records, keep an eye out for large expenses. For most small businesses, most of their funds go to labor and inventory costs. If your labor cost continues to be a liability, consider outsourcing.
When you outsource workers, you can save money, as contractors don’t require work benefits such as health insurance plans. You’ll also be paying for the time they spent completing the task instead of a weekly salary. This is beneficial, especially if you hired competent workers that can finish an 8-hour job in 4 hours.
In fact, there are numerous companies that can help you with this by using global peo services to outsource your HR department, especially internationalization.
During this pandemic, it’s also likely that some of your supplies get spoiled. As a remedy, try limiting your services to help cut off your losses.
If you’re running a restaurant, serve a menu that uses the same ingredients. This way, you won’t have to buy various supplies, helping reduce your expenses.
6. Be Creative in Your Invoices
Businesses can’t avoid accounts receivable. Thus, you must exert effort in your invoices. Sending an invoice letter is no longer enough to prompt customers to pay.
Come up with creative ideas to encourage your customers to pay on time. You can try offering premium discounts for those who’ll pay early.
You should also consider investing in accounting software that automates invoices. This will help promote a more efficient communication process.
7. Consider Getting Professional Help
Most small businesses have a misconception that it’s impractical to hire financial help.
In reality, getting financial help from companies like Finvisor makes a big difference. Accounting services are a cost-effective option. Professionals have a better understanding of the economic sector, which allows them to help you establish a concrete business budget.
Small business accounting personnel can also inform you of financial opportunities and how you can use them to your advantage. A competent accountant can also provide you insights and accounting tips on complicated issues. All these contribute to maximizing your resources and minimizing your potential loss.
Get More Accounting Tips Here
It’s best to hire a financial advisor and get help in creating a practical budget plan for your business. You should also be keen on recording and tracking your financial transactions. Make sure to follow all these seven accounting tips to avoid sticky financial situations.
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