Accounting has a crucial part to play in running or expanding your business whether it is a start-up or a well-developed business. It is simply not just an adding or subtracting procedure but also a method that assists in tracking overall income, profit, and expenditure of a business, regulates statutory compliance and focuses on the management that results in expanding the business and attracting investors. Unfortunately, small organizations often handle accounts on their own to save money which is the biggest blunder. Due to the lack of account knowledge, small business owners face a drastic decrease in the graph depicting the growth of their business.
Here are some significant points to follow while managing accounts for a small business:
For an entrepreneur time is precious. The owner tends to put effort and attention in the correct area of their business to achieve goals. The problem arises when a passionate owner manages accounts of their small-scale business on their own instead of delegating the responsibility to others which drastically affects the performance and reduces the growth of the business. Moreover, managing accounts can be time-consuming preventing the owner to maintain the service standards of their business. Thus, it is a wise decision for a small business owner to hire an account professional to save time and avoid risking their business to save some money.
A successful businessman never looks for cheap solutions to save some additional expenses as the outcome might be negative or destructive for the company’s reputation. It is immensely important for an entrepreneur to understand the simple fact that “You get what you pay for”. If a businessman chooses to avail services offering the cheapest rates in the market, then it is definitely a wrong approach as the quality of work is compromised in the long run.
DISTINGUISHING CASH FLOW & PROFITS
Keeping a track of spending and selling things is highly recommended as you may go bankrupt even if your company is showing profits in financial statements. Distinguishing between cash flow and profits is essential as it will give you a more transparent sense to know the status of your business. Cash flow is the flow of cash to conduct overall financial activities including investments. Whereas, Profit is what remains after the subtraction of the company’s expenses from the sales revenue.
SEPARATING PERSONAL & BUSINESS ACCOUNTS
To attain condensed records, the business owner initially needs to separate his personal and business accounts to avoid muddling up the finances. A separate business account allows you to keep a record for all your business expenses to track valuable tax deductions as well which otherwise may lead to penalties if you fail to maintain their record.
SOFTWARE OR CLOUD TECHNOLOGY
To run the business smoothly, an entrepreneur needs to avail the benefits of technology and should introduce it to work to save time and money. An efficient software automatically generates the budget and payrolls for your business, saving your valuable time. The commonly used Microsoft excel is useful to an extent as it is not advanced in recognizing human errors. However, the latest Cloud technology offers double-entry methods to eliminate such errors.
Performing or scheduling routine backups to secure and store the financial data of the business is highly suggested. The backups can be created via online platforms particularly in an encrypted format. A company should be well prepared for any bad circumstances that could destroy years of records and data. Hence, it is necessary for a business to frequently maintain regular backups of data and other information.